An increasing number of student loan borrowers are taking advantage of income-driven repayment plans that cap their monthly payments at a certain percentage of monthly earnings, the Department of Education (ED) said Thursday.
The newly-released quarterly data show 3.9 million Direct Loan borrowers were enrolled in income-driven repayment plans as of June 30, 2015 – up 56 percent from 2.5 million one year ago. The data also show that the proportion of borrowers more than 31 days delinquent on their loan payments has also fallen to 21 percent, from 23 percent in 2014.
“We’ve made it a priority to give Americans better options to manage their student loans and make sure they know about those options,” said Secretary of Education Arne Duncan, in a statement. “There’s more work to do, we won’t stop fighting to help people who are struggling to pay back their student loan debt, but the fact that more and more borrowers are taking advantage of the opportunity to cap their monthly payments is a good sign.”
While the overall delinquency rate has dropped, though, the absolute number of borrowers who are more than 31 days late on their payments – and the absolute dollar amount of delinquent loans – continues to increase. Of the roughly 14.7 million borrowers currently in repayment, nearly 3.1 million are at least 31 days delinquent. At the same time in 2014, about 2.9 million of the 12.5 million borrowers in repayment were at least 31 days late on their payments.
ED also points out that a lower proportion of outstanding student loan debt is in deferment or forbearance. The percentage of Direct Loan volume in deferment has dropped to 11.6 percent, from 13 percent in 2014. The most frequent reason for the use of deferments, ED said, is because borrowers have returned to school.
However, the percentage of outstanding loan volume in default has increased slightly. This time last year, $37.4 billion of the outstanding $685.7 billion in Direct Loan volume (or 5.5 percent) was in default. The most recent data show $47.9 billion of the $803 billion in outstanding Direct Loan volume (or 6 percent) was in default as of the end of June. The absolute number of borrowers in default has also increased from 2.6 million last year to 3.2 million in the most recent data.
In total, more than half of all Direct Loan borrowers who hold $409 billion in loans are not currently making payments because they are either in school, in a grace period, or in deferment, forbearance, or default on their loans. Alternatively, roughly 60 percent of Federal Family Education Loan borrowers are currently in repayment.
The data also for the first time show how many borrowers on income-driven repayment plans are making reduced payments due to partial financial hardship. A significant portion of borrowers on the income-based repayment plan (2.09 million of 2.61 million) are making reduced payments due to partial financial hardship. Of the 660,000 borrowers enrolled in the Pay As You Earn repayment plan, 580,000 – or about 88 percent – make reduced payments due to partial financial hardship.
Publication Date: 8/21/2015