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Incremental Steps Toward Bold Student Loan Reforms

Education Next – Sandy Baum and Matthew M. Chingos

“The options available to former students repaying their federal student loans have improved over the past decade. Instead of making equal payments every month for 10 years, 31 percent of borrowers are now in plans that set payments at an affordable share of their incomes and forgive remaining balances after 20 or 25 years. But the system of multiple plans is too complicated and difficult to navigate, default rates remain stubbornly high, and the latest estimates project significant long-term costs to taxpayers.” (more)

The Looming Student Loan Crisis Is Worse Than We Thought

Education Next – Judith Scott-Clayton

“This report analyzes new data on student debt and repayment, released by the U.S. Department of Education in October 2017. Previously available data have been limited to borrowers only, follow students for a relatively short period (3-5 years) after entering repayment, and had only limited information on student characteristics and experiences. The new data allow for the most comprehensive assessment to date of student debt and default from the moment students first enter college, to when they are repaying loans up to 20 years later, for two cohorts of first-time entrants (in 1995-96 and 2003-04).” (more)

Two Student Loan Studies Everyone Missed

Education Next – Jason D. Delisle

“Novel research that focuses on student loans tends to receive considerable attention these days. Yet two recent studies with big implications for the federal student loan program have gone largely unnoticed. Perhaps that is just a coincidence. Or perhaps it is because these studies contradict popular narratives about student debt that imply the loan program ought to be more generous and lenient. Each paper is summarized below, followed by a discussion of what the findings imply for policy reforms.”(more)

How freezing credit after Equifax will shut you out of some student loans

USA Today – Susan Tompor

“Here’s something student loan borrowers don’t want to hear: The Equifax data breach now could cast a shadow on applying for some college loans, too. After the Equifax data breach hit in early September, many consumer watchdogs —including the Federal Trade Commission and U.S. PIRG — advocated that consumers consider putting a freeze on their credit report if they felt their Social Security number and other data had been compromised.”(more)

Winners and Losers in President Trump’s Student Loan Plan

Education Next – Jason D. Delisle and Alexander Holt

“President Trump proposed major changes to the federal student loan program in his first budget request to Congress. These include reforms to the Income-Based Repayment (IBR) program and the interest-free benefit on some loans for undergraduates. This paper offers a first look at the likely net effect of these changes proposed for undergraduate and graduate students (excluding the effects of eliminating the Public Service Loan Forgiveness program). We use hypothetical borrower scenarios to compare how much borrowers with different loan balances would pay under the Trump proposal as compared to the existing program. Generally, we show that undergraduate students would receive a net increase in benefits relative to the current program due to earlier loan forgiveness. Those benefits are largest for borrowers with above-average debts and relatively higher incomes in repayment. The analysis also provides a reminder that graduate students can receive generous benefits under the current IBR program without having to earn a low income. The Trump proposal would substantially reduce benefits for graduate students below what they could receive under the current IBR program and even under the original 2007 version of IBR.”(more)

The Tangled World of Teacher Debt

Education Next – Alexander Holt and Jason D. Delisle

“Say you’re a 3rd-grade public school teacher with $50,000 in student-loan debt. The federal Stafford Teacher Loan Forgiveness program sounds like a great idea: teach for five years while you make monthly payments right-sized for your income, and the government will forgive $5,000 of what you owe. But then comes the fine print. Accepting the $5,000 resets a different loan-forgiveness clock—the one that would have erased your outstanding debt entirely after 10 years, since you’re a public employee. To access that benefit, now you’re stuck with another decade of payments, or 15 years in all. It’s hard to follow, and would be even if the explanation were not buried in Section 8 of the “Public Service Loan Forgiveness Employment Certification” form in the third paragraph of the subsection titled ‘Other Important Information’.”(more)