Feds push income-based loan repayment program

Only about seven percent of federal student loan borrowers use the program.

Feds push income-based loan repayment program

Roy Aker

National education officials are looking to inform borrowers about another way to lower federal student loan payments.

The U.S. Department of Education is sending about 3.5 million emails to borrowers in an attempt to increase awareness for an income-based repayment program, which few use.

The federal government launched the income-based repayment plan created in 2009 hoping to reduce default rates. But only about 6.5 percent of borrowers used this repayment method in the fourth quarter of 2013.

Because these payments are tied to income, they tend to be lower than payments under other plans. The payment can adjust annually based on changes to annual income and family size.

But it’s still unclear who exactly qualifies for an income-based plan.

According to the Federal Student Aid website, a borrower is eligible for an IBR plan if his or her “student loan debt is high relative to [his or her] income.” The website also says borrowers “must have a partial financial hardship” to qualify.

The website doesn’t give specifics for how income affects the amount due each month.

This type of outreach is new to borrowers, according to the Institute for College Access and Success.

TICAS said although the outreach is a good start, the government could explain more about income-based options. The institute said the sample email the department released failed to mention any remaining debt can be forgiven after 25 years of repayment in an income-based plan.

According to TICAS, students cannot use the repayment estimator on the Department of Education website unless they’re logged into the system, adding to student confusion.

The push for more income-based repayment plans came with President Barack Obama’s new higher education agenda. The Office of Federal Student Aid will also push income-based repayment on social media websites.

Matt Forstie, Minnesota Student Association Legislative Coalition chairman, said it’s good the government is increasing outreach, but it should also push for more financial literacy.

Forstie also noted that many borrows may have graduated already and might have missed the notice if they’re no longer checking their college email.

Leah Chaney, president of the University of Minnesota group Students for Education Reform-Minnesota, said she’s glad the department is reaching out to more students.

Chaney said she thinks many students lack knowledge about their federal loans, especially when they’re still in school.

“They just let us know we need to start paying — six months after graduation,” she said.