Despite the availability of income-driven repayment (IDR) plans—and significant improvements to program design and generosity over time—too many federal student loan borrowers continue to struggle with repayment. Many struggling borrowers never enroll in an IDR plan; even for some who do, income-based monthly payments can still be too high. Borrowers also struggle to navigate the bureaucratic hurdles of enrolling in and staying enrolled in IDR plans.
For IDR to better protect borrowers from unaffordable payments, keep borrowers out of default, and provide a reliable light at the end of the tunnel, policymakers must make significant reforms to IDR design and implementation. These forward-looking design changes must be made alongside ongoing efforts to address historic shortcomings of the IDR system.
How Reforming Income-Driven Repayment Can Reduce the Burden of Student Debt focuses on two key design changes that will help reduce the burden of debt for millions of borrowers: (1) increasing the amount of a borrower’s income that is “protected” from the IDR payment formula and (2) shortening the maximum repayment period.