For student loan borrowers struggling to repay their loans, income-driven repayment plans are a lifeline that helps millions of people stay out of default. There are several income-driven repayment plans: Pay As You Earn – PAYE, Revised Pay As You Earn – REPAYE, Income-Based Repayment – IBR, Income-Contingent Repayment – ICR. These programs let borrowers make payments based upon their income and family size. Borrowers who are in these plans for 20 or 25 years (depending on the plan) can get the remaining balance forgiven.
Unfortunately, a bill is moving through the U.S. House of Representatives that could weaken this critical lifeline for the lowest income student loan borrowers. This bill, named the PROSPER Act, would increase the minimum monthly payment from zero to $25. We think this would increase risk of default for the lowest income borrowers—including a disproportionate share of low-income students, women, people of color, and veterans—who would not be able to pay an additional $25 every month and meet their families’ basic needs.
The bill also eliminates the possibility of forgiveness after a set number of years. According to The Institute for College Access and Success (TICAS), by removing the promise of forgiveness after 20 or 25 years of payment, the lowest income borrowers would no longer see a light at the end of the tunnel. These borrowers may instead be stuck repaying their student loans for the rest of their lives. For example, under this plan, it could take a low-income borrower with $20,000 in student loan debt up to 92 years to repay their student loans. And unfortunately, many borrowers owe even more than $20,000. These borrowers would carry their student loan debt to the grave.
Do you want to help us keep student loan payments affordable and ensure there’s a light at the end of the tunnel? Tell us what income-driven repayment has meant to you.
Want to know more? Check out this great series of blog posts by TICAS on the PROSPER Act.