Rise in Student Loan Repayment Plans, Forgiveness Programs Offers Hope to College Grads
The U.S. Office of Federal Student Aid (FSA) recorded higher enrollment for student loan repayment plans this quarter. Meanwhile, delinquency and default rates declined slightly, perhaps an indicator that more repayment options lead to heightened reliability.
As of June 2016, enrollment in Income-Driven Repayment (IDR) increased 36 percent from a year ago and 110 percent since June 2014. Approximately 5.3 million direct loan borrowers are currently enrolled in these plans, including Income-Based Repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE).
The Public Service Loan Forgiveness (PSLF) program, which alleviates student loan repayment for government and not-for-profit professionals, approved two-thirds of its applicants since its implementation. Borrowers who qualify for PSLF must make 120 monthly payments on their direct loans while working for qualifying employers. Congress began the program in 2007 through the College Cost Reduction and Access Act. The government could grant eligible loan forgiveness as soon as October 2017.
“We want to ensure that those Americans who have devoted a decade of their careers to public service are not burdened by debt while making invaluable professional contributions to their communities,” said Secretary of Education John B. King, Jr.
As more student loan borrowers enrolled in IDR programs, defaults declined to 1.7 percent this quarter, compared to 2.1 percent in 2015. Direct loan repayment delinquency (for 31 days or more) decreased 2.4 percent since last year.
Submissions for the Free Application for Federal Student Aid (FAFSA) decreased 3.5 percent this quarter, part of a greater trend the FSA contributes to lower unemployment rates after The Great Recession.
Jennifer is a Boston-based freelance journalist who has covered emerging fashion and New York Fashion Week for Papercut magazine. When she isn't talking people's ears off, she studies art history and reconstructs thrift clothes into her own designs.