increasing postsecondary attainment through smarter student-loan repayment

8/9/2019 Increasing Postsecondary Attainment Through Smarter Student-Loan Repayment

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Increasing Postsecondary

Attainment Through SmarterStudent-Loan Repayment

By Elizabeth Baylor and David Bergeron March 26, 2015


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Increasing PostsecondaryAttainment Through SmarterStudent-Loan Repayment

By Elizabeth Baylor and David Bergeron March 26, 2015


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1 Introduction and summary

5 Paying for college increasingly relies on student-loan de

15 Recommendations

20 Conclusion

22 Endnotes

Contents


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1 Center for American Progress | Increasing Postsecondary Attainment Through Smarter Student-Loan Repayment

Introduction and summary

By he year 2020, nearly wo-hirds o U.S. job openings will require possecond-

ary educaion, according o workplace projecions by Georgeown Universiy’s

Cener on Educaion and he Workorce. Tose projecions show ha 35 percen

o jobs in 2020 will require a bachelor’s degree and 30 percen will require an

associae’s degree or oher educaion credenial.1 Based on curren possecondary

educaion atainmen levels, his daa means ha he U.S. economy will soon ace

a shorall o 5 million college-educaed workers.2

Meeing uure workplace demand means significanly boosing he share o

Americans who have atained high-qualiy possecondary educaion degrees

and credenials. According o he mos recen daa rom he Organisaion or

Economic Co-operaion and Developmen, or OECD, 43 percen o Americans

have earned a possecondary degree or credenial, and o hose same Americans,

32 percen have atained a bachelor’s degree or higher.3

oday, he U.S. economy has $1.3 rillion in ousanding suden-loan deb; $1.1

rillion o ha deb is he resul o ederal loan programs wih he remaining $200

billion in suden-loan deb coming rom privae lenders.4 Ousanding ederal su-

den-loan deb equaled $27,800 per borrower in 2014, which is up rom $18,300 per

borrower in 2007.5 Te sysem o collecing ederal suden loans relies on servicers

and collecion agencies ha have litle incenive o prioriize he financial well-being

o sudens because he cos o providing he service and he amoun o loan deb

colleced drive he allocaion o he porolio. In addiion, choosing a repaymen

plan is complicaed because new plans have been layered upon each oher over ime.

Te ederal governmen mus play a crucial role in increasing possecondary

educaion atainmen, specifically by ensuring ha American sudens have hefinancial resources needed o go o college and by minimizing he amoun o deb

hey are required o ake on. o address hese challenges, he Cener or American

Progress recenly released a new plan or he U.S. higher-educaion sysem,

College or All. College or All would guaranee ha every high school graduae

would be able o atend our-year, public insiuions wihou having o incur any


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uiion or ees while enrolled. Sudens atending privae schools would receive

suppor equivalen o he cos o a public insiuion’s uiion and ees. Graduaes

would be required o repay he cos o heir uiion and ees, bu repaymen would

be based on heir income. Pell Grans and American Opporuniy ax Credis

would be reained and argeed a he mos a-risk sudens in order o cover he

ull cos o atendance or suppor heir atendance a privae insiuions.

Tis proposal calls or modernizing he way suden loans are repaid in order

o promoe affordabiliy, eliminae deaul and is derimenal economic conse-

quences, and reduce axpayer coss. Ulimaely, CAP proposes he creaion o a

new sysem ha uilizes he Inernal Revenue Service’s, or IRS’s, wage-wihhold-

ing sysem o repay suden loans auomaically. Tis modern sysem would make

all borrowers eligible or simple, affordable repaymen erms based on income

and employ modern daa exchanges and smar sraegies o help sudens proac-

ively manage suden-loan deb. Auomaic loan repaymen would be he deaul

mehod o repaymen under he new sysem; i would offer incenives o suden borrowers o boos paricipaion.

Tis repor describes he elemens o he universal wage-wihholding sysem

or suden-loan repaymen and oulines an implemenaion process ha would

allow he Obama adminisraion o begin o pilo he sysem o ensure i works

well. Te pilo would begin by allowing ederal workers wih suden-loan deb

o repay some loans auomaically and expand he pilo o workers in he privae

secor. I College or All were adoped, his model could be urher sreamlined o

manage possecondary educaion financing. Even wihou he expanded benefis

o College or All, his new sysem o repaymen would help borrowers by sream-

lining he process or repaymen and expanding access o affordable repaymen

erms, minimizing heir risk o deaul.

CAP proposes he ollowing elemens o he program:

• Use the IRS’s wage-withholding system to automatically repay student loans:

Congress should enac legislaion o allow all borrowers wih ousanding

suden-loan debincluding hose wih privae loans and Federal Family

Educaion Loan, or FFEL, Program loansand new borrowers o auomaicallyrepay heir loans using he IRS’s wage-wihholding sysem.


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• Provide simple, affordable repayment terms for all borrowers: Ulimaely, all

ederal suden-loan borrowers who paricipae in his new sysem would be eli-

gible or a single, simple income-based plan. erms would be similar o oday’s Pay

As You Earn, or PAYE plan, which caps monhly paymens a 10 percen o discre-

ionary income and allows or he eliminaion o any remaining deb afer 20 years.

Individuals who earn enough would amorize he amoun owed in order o finishrepaying heir loans afer 10 years, similar o oday’s sandard repaymen plan.

• Share the savings: Once phased in, auomaic loan repaymen hrough wage

wihholding would be he sandard repaymen mehod or workers wih suden

loans, bu exising borrowers would have he abiliy o op ou o he sysem i hey

preerred o reain heir curren repaymen o servicers. Since wage wihholding

would be less expensive or he U.S. Deparmen o Educaion o run han he cur-

ren sysem o using hird-pary servicers and collecors, a porion o ha savings

could be shared wih borrowers o creae an incenive or hem o paricipae.

• Build a smarter system that proactively helps borrowers manage their debt:

Te modern loan repaymen sysem would opimize affordable loan repaymen.

I would use modern daa exchanges wihin he ederal governmen and privae-

secor parnerships o proacively help sudens manage heir deb. In order o

eliminae deaul and is grim economic consequences, borrowers wih economic

hardship would be proacively reassigned a monhly paymen based on income

in order o ensure affordable repaymen. For example, i a borrower applied or

unemploymen insurance, inormaion communicaing his saus could be shared

beween he U.S. labor and educaion deparmens, and he suden would be reas-

signed a monhly paymenlikely very lowbased on he new income level.

Tis program would require legislaive acion in order o provide all borrowers

wih access o is wage wihholding and o creae incenives in he orm o shared

savings. Sreamlining repaymens erms would also require legislaive acion. Te

U.S. Deparmen o Educaion could move orward wih a pilo o he wage-wih-

holding mechanism hrough he ollowing:

• Create a smooth transition to the new repayment system beginning with the

federal workforce: Te Obama adminisraion should use is execuive auhor-iy o pilo an auomaic suden-loan repaymen program wihin he ederal

workorce. Te ederal governmen would use exising payroll sysems o cal-

culae monhly paymens and auomaically credi suden-loan accouns held

by employees. Federal workers wih bank-based FFEL loans could consolidae

ino he new program srucure in order o ake advanage o he wage-wih-

holding sysem.


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• Partner with private-sector employers to allow borrowers to pay their fed-

eral direct loans through wage withholding: Once he U.S. Deparmen o

Educaion has developed he capaciy o direc wages o ousanding ederal

loans, i could engage privae employers ha would like o provide his service

o heir employees.

ogeher, hese changes would make suden loans more affordable and ensure

ha suden borrowers are in repaymen plans ha promoe boh economic well-

ness and sabiliy.


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Paying for college increasingly

relies on student-loan debt

America’s higher-educaion financing sysem has become increasingly dependen

on suden-loan deb. Daa released by he U.S. Deparmen o Educaion every

our years provides deailed inormaion on how sudens and amilies finance

possecondary educaion. During he 2011-12 academic year, 40 percen o

undergraduaes borrowed under ederal suden-loan programs o pay or heir

educaion; his was a marked increase rom 35 percen in 2007-08 and 33 percen

in 2003-04.6 Among sudens who borrowed, he average amoun borrowed in

2012 was nearly $7,796, up 26 percen rom $6,201 in 2008 and up 44 percenrom $5,401 in 2004.7 Tese figures each represen jus one year o borrowing, so

oal borrowing levels or degree compleion are likely o be subsanially higher.

Paying or possecondary educaion has become increasingly

dependen on financial conribuions rom sudens and heir

amilies and on loans rom he ederal governmen. Te cumu-

laive amoun o revenue ha higher-educaion insiuions

received rom uiion paymens has increased yearly over he pas

decade. Afer adjusing or inflaion, insiuions o higher learn-

ing colleced a oal o $101 billion in uiion revenue during he

2003-04 school year.8 Ta amoun increased yearly, evenually

reaching $155 billion during he 2012-13 school year, he mos

recen year or which daa are available. Meanwhile, he amoun

o money ha sudens and amilies borrowed o finance heir

educaion similarly rose. Afer adjusing or inflaion, $57 billion

was borrowed rom ederal loan programs during he 2003-04

school year, an amoun ha increased o a high o $107 billion

during he 2010-11 school year. During he 2012-13 school year,

he amoun borrowed dipped slighly o $100 billion, likely dueo he improving economy.9

FIGURE 1

Federal student-loan borrowing in

2004, 2008, and 2012

Sources: Center for American Progress analysis of U.S. Department ofEducation data. See National Center for Education Statistics, 2003–04 N

Postsecondary Student Aid Study (U.S. Department of Education, 2013); NCenter for Education Statistics, 2007–08 National Postsecondary Student A

Study (U.S. Department of Education, 2009); National Center for EducatiStatistics, 2011–12 National Postsecondary Student Aid Study (U.S. Depart

Education, 2013). Data tools used for this analysis are available athttp://nces.ed.gov/surveys/npsas/.

Average amount borrowed

Share of students borrowing

$5,0002003-04 2007-08 2011-12

$6,000

$7,000

$5,401

$6,201

$8,000 $7,796

40%

35%

33%


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When examined on a per-suden basis, he increases in uiion paymens and ed-

eral suden-loan borrowing look similar o he overall increases o boh amouns.

Over he period examined, rom 2003 hrough 2013, he number o sudens

enrolled in insiuions o higher educaion increased: Tere were 17.3 million su-

dens enrolled in insiuions o possecondary educaion in he all o 2003 wih

he number o sudens rising o a high o 21.6 million in he all o 2011. As wih

he amoun o loan borrowing, he number o sudens enrolled in possecondary

insiuions dipped slighly o 21.1 million in he 2012-13 school year.10

Beween he 2003-04 school year and he 2012-13 school year, uiion pay-

mens increased rom $5,829 per suden o $7,327 per suden, an increase in

uiion o $1,498 per suden. Over ha period, he amoun o borrowing per

suden similarly increased. In 2003-2004, borrowing rom ederal suden-

loan programs equaled $3,293 per suden, increasing o a high o $4,935 per

suden during he 2010-11 school year and dropping o $4,738 per suden in

2012-13.11 Te change over he enire period equaled an increase o $1,444 per

suden. Borrowing per suden likely decreased in he mos recen years in par

because amilies sared o recover rom he impac o he economic recessionha began in 2008 and hus had more personal financial resources.

Total tuition

Total borrowing

Source: CAP analysis of U.S. Department of Education data. See endnote 8.

FIGURE 2

Tuition payments and student-loan borrowing are increasing

Total tuition revenue and student-loan borrowing per year, 2003-04 through 2012-13, in billions of constant fiscal year 2012 dolla

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-1$0

$20

$40

$60

$80

$100

$120

$140

$160Total tuition

Total borrowing


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Some students are having trouble repaying their loans

Analyses o he suden-loan porolio rack he increasing suden-loan balances

carried by Americans who have borrowed unds rom programs auhorized under

ile IV o he Higher Educaion Ac in order o atend possecondary insiuions.

In fiscal year 2007, 28.3 million individuals owed $516 billion in ousanding ederal

suden loans.12 By FY 2014, he number o borrowers increased 44 percen o 40.7

billion individuals, and he oal amoun owed more han doubled o $1.1 rillion

in ederal suden loans.13 Te Federal Reserve calculaes ha oal suden-loan bal-

ances equal $1.3 rillion, including an esimaed $200 billion rom privae banks.14

TABLE 1

Student-loan debt owed and loans in default are increasing

Fiscal yearNumber of borrowers

(in millions)

Total amount owed

(in billions)

Amount owed in

default (in billions)

2007 28.3 $516 $41

2008 29.9 $577 $47

2009 32.1 $657 $53

2010 34.3 $750 $61

2011 36.5 $848 $67

2012 38.3 $948 $79

2013 39.6 $1,040 $94

2014 40.7 $1,130 $105

Sources: Office of Federal Student Aid, Federal Student Aid Portfolio Summary (U.S. Department of Education, 2014), available at https://studentaid.ed.gov/about/data-center/student/portfolio; Office of Federal Student Aid, Servicer Summit Loan Portfolio Briefing Document (U.S. Department ofEducation, 2014), available at http://fsaconferences.ed.gov/servicingsummit.html. Document is available at the “Portfolio Overview” link.

FIGURE 3

Tuition revenue and student-loan borrowing per student is increasing

Tuition revenue and federal student-loan borrowing per student, 2003-04 through 2012-13, in constant FY 2012 dollars

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13$0

$1,000

$2,000

$3,000

$4,000

$5,000$6,000

$7,000

$8,000Total tuition

Total borrowing

Source: CAP analysis of U.S. Department of Education data. See endnote 8.


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Tere are signs ha some suden-loan borrowers sruggle o repay heir su-

den loans. Daa rom he U.S. Deparmen o Educaion show ha a significan

share o hose in repaymen do no make imely paymens on heir loans, insead

relying on orbearances and deermens, or hey simply become delinquen and

ulimaely deaul. Quarerly repors o he ederal suden-loan porolio rack

he saus o borrowers who are repaying heir loans and show ha a significanshare o hose loans are no being acively repaid. As o he ourh quarer o FY

2014, $523 million in ederal direc loans were in repaymen; o ha amoun,

$216 million, or 41 percen, were in deermen, orbearance, or deaul.15 Tere

were also $387 million in bank-based FFEL Program loans in repaymen; o ha

amoun, $144 million, or 37 percen, were in deermen, orbearance, or deaul.16

Te Deparmen o Educaion noes ha he majoriy o deermens in boh loan

programs are educaion relaed.17 A minimum, 27 percen o ederal direc loans

and 31 percen o FFEL Program loans are in economic disress.18

Deaul is he mos significan economic saus o nonrepaymen, occurring aferpaymen has no been made or a leas 270 days.19 As suden-loan borrowing

has increased in recen years, so has he value o suden loans ha are in deaul.

In FY 2007, deauled ederal suden loans equaled $46.7 billion; since hen, he

amoun has increased each year o $105.4 billion in suden-loan deauls in FY

2014. As a share o he whole porolio, he suden-loan deaul rae has remained

seady; i equaled 8 percen in FY 2007 and 9.2 percen in FY 2014.20

Too many student-loan repayment options complicates repayment

In order o make repaying suden loans more manageable and provide opions or

individuals wih differen financial circumsances, he ederal governmen offers

muliple repaymen plans ha vary in lengh o repaymen, allow or graduaed

paymens, and base he monhly paymen on a borrower’s income. However, each

newly creaed plan is added o he exising complemen o plans, making i increas-

ingly complicaed o navigae repaymen. Te sysem now couns seven separae

repaymen plans, all wih differen erms and eligibiliy guidelines.21 In addiion,

here are benefis ha allow sudens o repay a porion o heir deb hrough

service.22

Te advanages and disadvanages o each plan vary or individuals.However, suden borrowers mus be proacive and increasingly well inormed in

order o selec he repaymen plan ha suis heir needs. Below is a descripion o

repaymen plans and benefis available o ederal suden-loan borrowers.


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• Standard: Te sandard repaymen plan amorizes suden-loan deb over

10 years. Ineres raes are fixed, and his plan calculaes a monhly paymen

based on he oal principal and ineres due, divided equally by 120 pay-

mens. Te minimum paymen or he sandard plan is $50 per monh; i he

loan balance is low enough ha a suden owes less han ha minimum, hey

pay $50 per monh and repay heir loans in less ime. Tis repaymen plan ishe deaul plan. oday, suden-loan servicers enroll borrowers in his plan

unless hey elec an alernae plan.23

• Graduated: Similar o he sandard repaymen plan, he oal amoun owed under

he graduaed repaymen plan is based on a fixed ineres rae. However, monhly

paymens are varied so ha borrowers pay less immediaely afer leaving school.

Monhly paymens increase every wo years over he 10-year repaymen sched-

ule. Over he course o repaymen, a suden pays slighly more ineres han

under he sandard plan because less principal is paid in he beginning years. 24

• Extended: Te exended repaymen plan uses a fixed ineres rae and amorizes

suden-loan deb over a longer periodup o 25 yearsresuling in lower

monhly paymens. Because less principal is paid each monh, he oal iner-

es paymens paid over he lie o he loan can be significanly more han under

sandard repaymen. In order o be eligible or exended repaymen, borrowers

mus owe a minimum o $30,000 in a given suden-loan program. For example,

a borrower who owes less han $30,000 in direc loans and less han $30,000 in

bank-based FFEL Program loans bu owes more han $30,000 in oal loans is

ineligible or exended repaymen.25

• Repayment based on income: For borrowers wih direc loans, here are

muliple repaymen plans ha esablish monhly paymens based on wha he

borrower can afford. Raher han basing suden-loan paymens on he principal

balance plus ineres, hese plans calculae a monhly paymen relaed o income.

Tese plans are aimed a making suden-loan deb more manageable by reduc-

ing he monhly paymen or hose in need. Under hese plans, sudens are

never required o pay more per monh han hey would under he sandard plan.

Ineres coninues o accrue based on he sandard calculaion, so sudens could

pay more ineres over he repaymen period. Repaymen coninues beyond he10-year window i a balance remains, and afer a given imebeween 20 years

and 25 yearshe remaining balance is orgiven. Te hree plans wih differen

repaymen erms and ormulas are income-based repaymen, or IBR; Pay As

You Earn, or PAYE; and income-coningen repaymen, or ICR. Sudens are

eligible or each o hese programs based on when hey borrowed.26


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For sudens who borrowed under he bank-based FFEL sysem, here is he

income-sensiive repaymen plan. Tis plan also bases he monhly paymen on

borrower income, bu he monhly paymen may increase beyond he sandard

10-year amoun i he suden’s income suppors i. Lenders deermine he or-

mula o esablish he monhly paymen.27

Loan repayment that is affordable

and encourages economic security

As reliance on individual conribuions o finance possecondary educaion

increases and suden-loan deb becomes an imbedded par o he sysem, loan

repaymen mus be affordable. Repaymen plans ha are based on income are an

imporan par o he economic compac relaed o educaion deb. For young

aduls who pursue educaion beyond high school, median incomes increase wih

each level o educaional atainmen. In 2012, among ull-ime workers ages 25o 34, he median income or a person wih a high-school diploma was $29,960;

or a person wih an associae’s degree, he median income was $35,720; wih a

bachelor’s degree, i was $46,900; and wih a maser’s degree or higher, he yearly

In addition to the many loan repayment plans, there are certain

circumstances that allow borrowers with federal student loans to

eliminate their debt through public-service or teaching employment.

These programs complement repayment plans but require separate

terms to be met in order to achieve the benefit.

Public Service Loan Forgiveness, or PSLF, allows some student bor-

rowers enrolled in PAYE, IBR, and ICR to cease loan repayment after

10 years of on-time payments, regardless of what balance remains.

People in jobs that serve the public good such as nurses, teachers,

firefighters, and police; those employed by state, local, federal, and

tribal governments; and those working for nonprofit organizations

are eligible for this program.28 The Consumer Financial Protection

Bureau estimates that 25 percent of the workforce is eligible fo

PSLF.29 Workers must be employed full time to be eligible for de

elimination, thus ensuring that earnings are high enough to m

significant student-loan payments. Borrowers are only eligible

are enrolled in one of the income-related repayment plans des

above. If a borrower repaid under the standard plan in 10 years

is no balance left to forgive at the end of the period; graduated

extended repayment plans are ineligible.30

The Teacher Loan Forgiveness Program allows borrowers to elim

up to $17,500 in eligible federal student loans. To qualify, indiv

als must teach full time for five complete and consecutive acad

years and serve designated low-income communities.31

Earned elimination of student-loan debt


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median income was $59,620.32 Tis general rend ensures ha as sudens ake on

deb o pursue possecondary educaion, mos will benefi rom economic reurns

ha allow or smooh and affordable repaymen. However, or borrowers whose

incomes all below he levels needed o susain he repaymen o heir educaion

deb, suppor wih lower repaymen erms should be available.

Tere are a significan and growing number o suden loans in repaymen plans ha

acor in income levels when calculaing monhly paymens. Summary inormaion

o ake-up raes or repaymen plans based on incomesuch as PSLF, IBR, and

PAYEdemonsrae ha many individuals benefi rom hese programs. According

o daa released by he U.S. Deparmen o Educaion, $135 billion o he $478 bil-

lion in ousanding direc-loan balances in repaymen were enrolled in a repaymen

plan based on income as o he ourh quarer o FY 2014.33 Tis amoun is equal o

28 percen o he direc-loan porolio in repaymen.34 One year earlier in FY 2013,

$79 billion o he $372 billion in ousanding direc-loan balances in repaymen, or

21 percen, were enrolled in income-based repaymen plans.35

Te number o borrowers oping or hese repaymen plans is likely o increase

significanly in he coming years as eligibiliy is expanded and more borrowers

undersand heir benefis. Among repaymen plans based on income, PAYE offers

he mos generous erms, including lower monhly paymens and ewer years o

paymen beore borrowers are eligible o have remaining deb eliminaed.36 In

June 2014, recognizing he need o make repaying suden loans more affordable

or more borrowers, Presiden Barack Obama announced plans o expand access

o PAYE o 5 million more direc-loan borrowers.37

Student-loan servicing is complicated, expensive, and inefficient

Te prolieraion o repaymen plans is a resul o successive atemps o improve

upon prior models while making sure no previously enrolled borrowers lose

eligibiliy or heir plans along he wayhowever, his someimes resuled in

leaving hose borrowers in less avorable plans. Te muliude o opions wih

discree erms and ofen conusing eligibiliy parameers can make i hard or

borrowers o ideniy he plan ha bes suis hem financially. Moreover, repay-men opions have been added over ime. Te original sandard repaymen plan

has been available since he program began in 1965.38 Graduaed and exended

repaymen were added in 1989, ICR was added in 1994, IBR in 2009, and PAYE


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in 2012.39 Eligibiliy or some repaymen opions is based on which ype o loans

were offered when he suden borrowed or which program in which he suden’s

insiuion paricipaed: direc loans or bank-based FFEL loans.40 Finally, as new

repaymen opions are added, exising plans are reained or borrowers who have

already enrolled. ogeher, his means ha signing up or a repaymen plan ha

bes suis a borrower’s economic needs and financial siuaion can be difficul.

In par because o he complexiy o loan repaymen and in par because bor-

rowers may be unaware o plans ha may make repaymen affordable, suden

borrowers have sough relie rom privae eniies ha purpor o help hem avoid

deaul or save money. A Naional Consumer Law Cener, or NCLC, invesigaion

examined his expanding suden-loan deb-relie indusry and ound misleading

pracices, including eniies mischaracerizing governmen programs as heir own

and charging ees or services ha he ederal governmen offers or ree.41

oday, he U.S. Deparmen o Educaion conracs wih 11 privae eniies, bohor profi and nonprofi, o conduc loan-collecion services, requiring a significan

oulay o he deparmen’s annual budge. Presiden Obama’s FY 2015 budge

requesed $772 million o manage he collecion and servicing o ederal su-

den loans. Tis reques equaled 53.5 percen o he Suden Aid Adminisraion

budge.42 Te presiden’s budge reques saes, “As loan volume grows, he coss

o servicing increase.”43 I he sysem were modernized so ha he cos o servicing

he loans was reduced, invesmens rom he ederal governmen could be beter

direced oward supporing academic progress, promoing suden achievemen,

or lowering he cos o pursuing educaion raher han deb collecion.

Te sysem o collecing ederal suden loans by relying on servicers and collecion

agencies means ha he eniies ha inerac wih sudens are no compensaed in

a manner ha encourages boh he servicers and collecion agencies o ensure ha

sudens are enrolled in a plan ha suis heir financial needs. Te compensaion

ha hese organizaions receive is se hrough a compeiive bidding process ha

ha drives oward he lowes possible cos or he governmen or lender. While

he ederal governmen has atemped o include he perormance o he service or

collecion agency in he allocaion o new accouns, such an approach sill largely

ocuses on financial perormance raher han on sudens and heir needs.

Under he curren loan-servicing sysem, conraced collecion agencies sub-

jec borrowers who deaul on heir loans o aggressive collecion aciviies. Te

U.S. reasury Deparmen ulimaely has he power o auomaically garnish 15


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percen o borrowers’ wages, ake ederal benefis such as Social Securiy, and

capure all o a borrower’s ax reund in order o recover ousanding suden-loan

deb.44 oday, hese collecion aciviies can only occur afer an accoun has been

delinquen or a significan amoun o imein his case, 270 days. Sudens in

deaul ace adverse consequences, including an addiional 24 percen ee o heir

ousanding balance in order o cover he coss associaed wih collecion, as wellas an adversely affeced credi raing.45 Tis ee can be reduced or waived hrough

negoiaion, bu a borrower mus proacively seek a compromise. Borrowers in

deaul are also eligible or loan rehabiliaion ha allows or re-enry ino an

affordable paymen plan afer good aih paymens have been made.46

In a December 2014 audi, he Office o Inspecor General, or OIG, ound ha

he U.S. Deparmen o Educaion’s lack o a comprehensive sraegy o address

suden-loan deauls mean ha he deparmen ailed o improve he siuaion

o sudens who were alling behind. Furhermore, his repor ound ha some

conracs wih suden-loan servicers did no ouline deaul prevenion acivi-ies, meaning some sudens received inadequae conacs rom servicers.47 Te

Obama adminisraion agreed wih he audi’s recommendaions o develop a plan

o preven suden-loan deaul and o improve monioring o deaul prevenion

aciviies.48 In ac, has already begun o implemen changes.

As par o is effors o improve he servicing o ederal suden loans, he Obama

adminisraion has made considerable effor o ensure ha i is sudencenric and

ha borrowers are proeced rom abusive pracices. In February 2015, he admin-

israion announced i would end cerain conracs wih five privae suden-loan

collecion eniiesbecause i ound hey provided misleading and inaccurae

inormaion o borrowersand improve guidance and monioring o oher

collecion eniies o ensure air pracices.49 In March 2015, Presiden Obama

announced he creaion o a suden aid bill o righs. Tis pledge would ensure

ha “every borrower has he righ o qualiy cusomer service, reliable inorma-

ion, and air reamen, even i hey sruggle o repay heir loans.”50 In paricular

he adminisraion aimed o raise he sandards o suden-loan servicing o ensure

ha sudens who all behind are charged reasonable ees and ha hey receive

help reurning o good sanding on heir loans.

While welcome and necessary, effors o improve ser vicing and proec suden-

loan borrowers who have deauled are ulimaely reacive. Suden borrowers

are required o wade hrough a complex sysem o figure ou he repaymen

plan ha bes suis heir financial needs; borrowers are no consisenly eligible


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or he same repaymen erms; and i hey all behind, borrowers ace grim

economic consequences beore hey ge back on he pah o repaymen. Te

derimenal economic consequences o ailing o repay suden loans are consid-

erable. For example, in a modern economy, a poor credi score can affec oher

aces o borrowers’ lives: I can negaively affec a borrower’s abiliy o obain

credi, finance a home, and, in some circumsances, ge a job.51

Te colleciono suden loans should be redesigned o ensure ha repaymen is affordable

and provides proecions or hose wih economic hardship. Bu, a is hear, i

should be proacive so ha suden borrowers ace clear, equal repaymen erms

and receive assisance beore hey all behind.


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Recommendations

Congress should enac legislaion o modernize repaymen o suden loans in

order o lower he cos o servicing suden-loan deb, as well as make i an easy

opion or borrowers o elec o repay heir loans based on income. Tis proposal

would require Congress o enac legislaion o allow all borrowers o paricipae

in a wage-wihholding sysem and o sreamline he repaymen opions. Te U.S.

Deparmen o Educaion could pilo he wage-wihholding aspec o he proposal

by allowing ederal employees o paricipae volunarily and work wih privae

employers ha seek o use wage wihholding on behal o heir employees o repayederal suden loans.

Use the IRS’s wage-withholding system

to automatically repay student loans

Modern loan repaymen would use he IRS’s wage-wihholding sysem o enable

borrowers o repay heir loans auomaically. Te wage-wihheld repaymen

sysem would require borrowers o be responsible or heir educaion deb while

offering repaymen erms ha make loans affordable.

Under he modern loan repaymen sysem, he IRS would receive unds rom

employers on behal o heir employees wih ousanding suden loans. Te IRS

would ranser he paymens o he U.S. Deparmen o Educaion o repay he

borrower’s suden-loan deb. Once he unds are received by he Deparmen o

Educaion, he borrower’s accoun would be updaed o reflec he paymen wih

he collecion process sopping auomaically once he borrower’s loan is ully

repaid or he balance is discharged. Tis approach is similar o how Social Securiy

ax paymens are handled oday.

Borrowers would be auomaically enrolled ino repaymen hrough he wage-wih-

holding sysem, and ulimaely, all new loans would be repaid hrough his sysem.

Savings semming rom he lower adminisraive expenses would be shared wih

borrowers in he orm o reduced ineres raes. In he ransiion o he new sysem,


19/28


borrowers wih exising deb could op ou o he wage-wihholding sysem and con-

inue o repay heir loans hrough heir exising servicers. Tose borrowers would

no paricipae in shared savings given he increased cos o servicing heir deb.

Simple, affordable repayment terms for all borrowers

Repaymen erms under modern loan repaymen should be affordable and clear.

When ully phased in, he sysem would make all borrowers wih ederal suden-

loan deb eligible or a single repaymen plan based on income ha is affordable

and racks progress oward eliminaion o deb. Repaymen erms offered under

he new plan would be similar o hose offered oday under Pay As You Earn.

PAYE requires monhly repaymens equal o 10 percen o discreionary income,

or income above he povery line. Afer 20 years o on-ime paymens, he remain-

ing deb is eliminaed. Borrowers wih sufficien earnings would make monhly

paymens equal o oday’s sandard repaymen plan, amorizing he deb in equalmonhly paymens over 10 years.

Te new repaymen sysem should also ensure ha proessionals in jobs ha

serve socieyeachers and public-service employeesare able o have any

remaining balance on heir loans orgiven afer 10 years o auomaic or on-ime

paymens. oday, his program requires eligible borrowers o proacively seek

he benefi and documen heir work in a qualified posiion. Using IRS wage

wihholding o manage suden-loan deb would allow he program o auo-

maically rack borrower progress oward Public Service Loan Forgiveness by

maching employer inormaion o esablish eligibiliy. Borrowers would receive

periodic updaes wih heir progress lised.

Share the savings to incentivize participation

Once ully implemened, all suden borrowers would be deauled ino in he

wage-wihheld repaymen plan. Tey would receive a discoun on heir ineres

rae equal o one-quarer or one-hal o a percenage poin, or 25 basis poins o 50

basis poins. During he ransiion o he new sysem, borrowers wih ousandingloans could op o reain heir curren servicer bu would no receive he dis-

couned ineres rae. Individuals currenly enrolled in an exising repaymen plan

based on income, such as PAYE or IBR, who have made paymens credied oward


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he eliminaion o deb would have hose monhs o paymen convered o he

new income-based repaymen program conemplaed under his proposal. Tis

provision would hold he borrower harmless rom having o sar a he beginning

o he repaymen period when convering o he new sysem and, or some, could

lead o a shorer repaymen window.

Build a smarter system that proactively

helps borrowers manage their debt

Under he new sysem, borrowers would be auomaically enrolled ino repay-

men plans based on income. Tese plans allow people who have paricularly low

earnings o say curren on loans while making progress oward orgiveness. Tis

saey ne or low repaymen is a key elemen ha makes auomaic repaymen

air. Proacive inervenion would mean ha ewer individuals would ace he ruly

devasaing economic consequences ha come wih suden-loan deaul.

Te U.S. Deparmen o Educaion should also parner wih oher ederal agen-

cies o creae auomaic riggers o ideniy borrowers who may sruggle o repay.

Currenly, he Deparmen o Educaion has ineragency agreemens o share

inormaion abou sudens paricipaing in ederal suden aid programs, includ-

ing effors o locae borrowers who have deauled on heir suden loans.52 Tese

daa-sharing effors could be harnessed o proacively ensure ha borrowers have

monhly paymens ha sui heir financial siuaion. For example, i a suden

borrower applied or unemploymen insurance, inormaion communicaing his

saus would be shared beween he U.S. labor and educaion deparmens, and

he suden would be reassigned a monhly paymenlikely very lowbased on

he new income level. Te suden could coninue o pay he previous monhly

amoun, bu he deaul acion would proacively lower he paymen. Similarly,

i a suden borrower began a new job wih differen earnings, modern inorma-

ion exchanges, including he Naional Direcory o New Hires, would help keep

monhly paymens in line wih curren income. Te ederal governmen also

makes paymens o individuals, eiher direcly or hrough sae inermediaries,

when hey ace economic hardships, including unemploymen and disabiliy.

Tese ypes o paymens could also rigger a borrower in his repaymen plan being auomaically assignedwih an op-ou opiona lower monhly pay-

men o preven a borrower deaul.


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Expand eligibility for automatic repayment

and PAYE-like repayment terms

Congress could expand access o wage wihholding and he new sreamlined

repaymen erms o al l ederal-loan borrowersboh direc loans and ousand-

ing bank-based FFEL loansas well as hose wih privae loans. oday, borrow-ers wih exising FFEL and privae loans are only eligible or repaymen plans

based on income i heir lender provides ha opion.53 Sudens wih hese loans

could consolidae heir ousanding suden-loan deb and op o paricipae

in he new wage-wihholding sysem so hey can make jus a single recurring

paymen. Under his proposal, borrowers who consolidaed could also qualiy

or repaymen based on income. As described above, previous on-ime monhly

paymens would be couned oward economic-hardship and public-service

deb eliminaion in order o incenivize paricipaion. Privae suden-loan deb

would need o be reaed careully o ensure ha he balances ulimaely elimi-

naed do no expose ederal axpayers o excessive risk.

Create a smooth transition to the new repayment system

An auomaic loan repaymen is a significanly differen mehod o repaying

suden loans han he curren sysem. For his reason, CAP believes ha piloing

he sysem would be an effecive means o ensuring i works well or borrowers,

employers, and he adminisraors o he loan program.

Pilot the new repayment system within the federal workforce

Te U.S. Deparmen o Educaion should pilo auomaic loan repaymen hrough

wage wihholding or ederal workers who have ousanding direc loans. Borrowers

could also include ousanding FFEL loans i hey choose o consolidae heir loans

hrough he Direc Loan Program. During he pilo, ederal workers could op ou

o wage wihholding and choose o coninue wih heir exising servicer.

Te ederal workorce is an ideal eniy o begin he use o wage-wihheld suden-loan repaymen because i is large and includes workers wih a variey o incomes,

many o whom have possecondary degrees and credenials. By he very naure

o employmen, ederal workerswho may also be suden-loan borrowersare

amiliar wih ineracions and inormaion sharing wih he ederal governmen.


22/28


Currenly, he ederal governmen uilizes a ew agencies o build and mainain he

sysems ha pay ederal employees across he governmen. Tese agencies have

already developed he capaciy o wihhold a porion o an employee’s income or a

variey o purposes, including healh insurance, chariable conribuions, and savings

allomens. I would be airly sraighorward or hese payroll agencies o build he

capaciy o deduc loan paymens rom ederal employees’ paychecks. Some agen-cies provide workers wih suden-loan repaymen assisance, ypically as a recrui-

men ool. Tese awards would be mainained as par o he new repaymen sysem.

Expand the system to workers in the private sector

Once wage-wihheld repaymen has been piloed wihin he ederal workorce,

he U.S. Deparmen o Educaion could offer o suppor repaymen hrough wage

wihholding o privae employers seeking o provide heir employees his benefi.

Te Obama adminisraion has announced parnerships wih privae ax-preparaioneniies o ensure ha workers know abou suden-loan repaymen opions.54

Likewise, parnerships wih large payroll adminisraors could ease he ransiion o

wage-wihheld suden-loan repaymens. Similar o he ederal governmen, here

are a small number o companies ha perorm he uncion o pay agen or privae

companies and nonprofi organizaions. Once he capaciy o receive paymens

hrough wage wihholding is buil, he ederal governmen could share his capabil-

iy wih pay agens so ha hey could provide he service o heir cusomers, making

i possible or privae-secor employees o pay hrough wage wihholding. Since

privae-secor employees are more likely o ace disrupions in employmen, provid-

ing his ype o service would be even more imporan han or ederal employees.


23/28


Conclusion

Individual and amily conribuions in he orm o uiion and ees are a significan

porion o he financing o possecondary educaion, which is criical o main-

aining America’s economic compeiveness in oday’s modern economy. Federal

suden loans provide individuals and amilies wih a significan porion o he

financial resources necessary o pursue educaion afer high school. However,

in order o suppor he naion’s educaion atainmen goals, he Unied Saes

urgenly needs o modernize he way suden loans are repaid in order o ensure

ha hey remain affordable.

CAP proposes piloing and developing a wage-wihholding sysem wihin he ed-

eral workorce o ransiion o his modern sysem. Te goal would be o ease he

burden o suden-loan repaymen, minimize delinquency, and eliminae deaul.

Once esablished, his new sysem would be expanded o include oher workers

ouside he ederal labor orce. In paricular, his sysem would promoe a repay-

men plan ha is based on income under erms ha are generous or he borrower.

Imporanly, modernizaion would make loan repaymen simple and easy while

improving Americans’ financial siuaion.


24/28


About the authors

David A. Bergeron is he Vice Presiden or Possecondary Educaion a he

Cener or American Progress. Prior o joining CAP, Bergeron served in a variey

o posiion a U.S. Deparmen o Educaion, including serving as he acing assis-

an secreary or possecondary educaion. In his posiion, Bergeron aced as heeducaion secreary’s chie advisor on higher-educaion issues and adminisered

more han 60 gran and loan programs ha provide nearly $3 billion annually o

insiuions o higher educaion and communiy-based organizaions.

Elizabeth Baylor is he Associae Direcor or Possecondary Educaion a he

Cener. Her work ocuses on improving affordabiliy and qualiy wihin he U.S.

higher-educaion sysem and ensuring ha all Americans have access o a college

educaion. Prior o joining he Cener, Baylor served on he saff o he Senae

Healh, Educaion, Labor and Pensions, or HELP, Commitee under he lead-

ership o Chairman om Harkin (D-IA). She holds a B.A. in hisory rom heUniversiy o Pennsylvania and an M.P.A. rom Harvard Universiy’s Kennedy

School o Governmen.


25/28


Endnotes

1 Anthony P. Carnevale, Nicole Smith, and Jeff Strohl,“Recover: Job Growth and Education Requirements

Through 2020” (Washington: Georgetown UniversityCenter on Education and the Workforce, 2013), avail-able at https://georgetown.app.box.com/s/tll0zkxt0pu-z45hu21g6.

2 Ibid.

3 Organisation for Economic Co-operation and Develop-ment, “Education at a Glance 2014: OECD Indicators”(2012), Table A1.1a, available at http://www.oecd.org/edu/Education-at-a-Glance-2014.pdf .

4 Board of Governors of the Federal Reserve, “FederalReserve Statistical Release: Consumer Credit – G.19”(2015), available at http://www.federalreserve.”gov/releases/g19/current/g19.pdf ; Federal Student Aid,“Federal Student Loan Portfolio: Direct Loan andFederal Family Education Loan Portfolio by Loan Status,”available at https://studentaid.ed.gov/about/data-center/student/portfolio (last accessed March 2015).

5 CAP analysis of Federal Student Aid, “Federal StudentLoan Portfolio: Federal Student Aid Portfolio Summary,”

available at https://studentaid.ed.gov/about/data-center/student/portfolio (last accessed January 2015).

6 CAP analysis of U.S. Department of Education, NationalPostsecondary Student Aid Studies (2003–04, 2007–08,and 2011–12), available at http://nces.ed.gov/surveys/npsas (last accessed December 2014).

7 Ibid.

8 CAP analysis of U.S. Department of Education data; Fed-eral Student Aid, “Title IV Program Volume by School,”available at https://studentaid.ed.gov/about/data-center/student/title-iv (last accessed December 2014);Scott A. Ginder, Janice E. Kelly-Reid, and Farrah B. Mann,“Enrollment in Postsecondary Institutions, Fall 2013;

Financial Statistics, Fiscal Year 2013; and Employees inPostsecondary Institutions, Fall 2013” (Washington: U.S.Department of Education, 2014), available at http://nces.ed.gov/pubs2015/2015012.pdf ; Scott A. Ginderand Janice E. Kelly-Reid, “Enrollment in PostsecondaryInstitutions, Fall 2012; Financial Statistics, Fiscal Year2012; Graduation Rates, Selected Cohorts, 2004-09;and Employees in Postsecondary Institutions, Fall 2012”(Washington: U.S. Department of Education, 2013),available at http://nces.ed.gov/pubs2013/2013183.pdf ; Laura G. Knapp, Janice E. Kelly-Reid, and Scott A.Ginder, “Enrollment in Postsecondary Institutions, Fall2011; Financial Statistics, Fiscal Year 2011; and Gradua-tion Rates, Selected Cohorts, 2003–2008” (Washington:U.S. Department of Education, 2012), available athttp://nces.ed.gov/pubs2012/2012174rev.pdf; LauraG. Knapp, Janice E. Kelly-Reid, and Scott A. Ginder,“Enrollment in Postsecondary Institutions, Fall 2010;Financial Statistics, Fiscal Year 2010; and Graduation

Rates, Selected Cohorts, 2002-2007” (Washington: U.S.Department of Education, 2012), available at http://nces.ed.gov/pubs2012/2012280.pdf ; Laura G. Knapp,Janice E. Kelly-Reid, and Scott A. Ginder, “Enrollmentin Postsecondary Institutions, Fall 2009; GraduationRates, 2003 & 2006 Cohorts; and Financial Statistics,Fiscal Year 2009” (Washington: U.S. Department ofEducation, 2011), available at http://nces.ed.gov/pubs2011/2011230.pdf; Laura G. Knapp, Janice E. Kelly-Reid, and Scott A. Ginder, “Enrollment in PostsecondaryInstitutions, Fall 2008; Graduation Rates, 2002 and2005 Cohorts; and Financial Statistics, Fiscal Year 2008”(Washington: U.S. Department of Education, 2010),available at http://nces.ed.gov/pubs2010/2010152rev.pdf ; Laura G. Knapp, Janice E. Kelly-Reid, and Scott A.Ginder, “Enrollment in Postsecondary Institutions, Fall2007; Graduation Rates, 2001 and 2004 Cohorts; andFinancial Statistics, Fiscal Year 2007” (Washington: U.S.Department of Education, 2009), available at http://

nces.ed.gov/pubs2009/2009155.pdf ; Laura G. Knappand others, “Enrollment in Postsecondary Institutions,Fall 2006; Graduation Rates, 2000 and 2003 Cohorts;and Financial Statistics, Fiscal Year 2006” ( Washington:U.S. Department of Education, 2008), available at http://nces.ed.gov/pubs2008/2008173.pdf ; Laura G. Knappand others, “Enrollment in Postsecondary Institutions,Fall 2005; Graduation Rates, 1999 and 2002 Cohorts;and Financial Statistics, Fiscal Year 2005” ( Washington:U.S. Department of Education, 2007), available at http://nces.ed.gov/pubs2007/2007154.pdf ; Laura G. Knappand others, “Enrollment in Postsecondary Institutions,Fall 2004; Graduation Rates, 1998 & 2001 Cohorts; andFinancial Statistics, Fiscal Year 2004” (Washington: U.S.Department of Education, 2006), available at http://nces.ed.gov/pubs2006/2006155.pdf.

https://georgetown.app.box.com/s/tll0zkxt0puz45hu21g6https://georgetown.app.box.com/s/tll0zkxt0puz45hu21g6http://www.oecd.org/edu/Education-at-a-Glance-2014.pdfhttp://www.oecd.org/edu/Education-at-a-Glance-2014.pdfhttp://www.federalreserve./http://www.federalreserve./https://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttp://nces.ed.gov/surveys/npsashttp://nces.ed.gov/surveys/npsashttp://nces.ed.gov/pubs2015/2015012.pdfhttp://nces.ed.gov/pubs2015/2015012.pdfhttp://nces.ed.gov/pubs2013/2013183.pdfhttp://nces.ed.gov/pubs2013/2013183.pdfhttp://nces.ed.gov/pubs2012/2012174rev.pdfhttp://nces.ed.gov/pubs2012/2012280.pdfhttp://nces.ed.gov/pubs2012/2012280.pdfhttp://nces.ed.gov/pubs2011/2011230.pdfhttp://nces.ed.gov/pubs2011/2011230.pdfhttp://nces.ed.gov/pubs2010/2010152rev.pdfhttp://nces.ed.gov/pubs2010/2010152rev.pdfhttp://nces.ed.gov/pubs2009/2009155.pdfhttp://nces.ed.gov/pubs2009/2009155.pdfhttp://nces.ed.gov/pubs2008/2008173.pdfhttp://nces.ed.gov/pubs2008/2008173.pdfhttp://nces.ed.gov/pubs2007/2007154.pdfhttp://nces.ed.gov/pubs2007/2007154.pdfhttp://nces.ed.gov/pubs2006/2006155.pdfhttp://nces.ed.gov/pubs2006/2006155.pdfhttp://nces.ed.gov/pubs2006/2006155.pdfhttp://nces.ed.gov/pubs2006/2006155.pdfhttp://nces.ed.gov/pubs2007/2007154.pdfhttp://nces.ed.gov/pubs2007/2007154.pdfhttp://nces.ed.gov/pubs2008/2008173.pdfhttp://nces.ed.gov/pubs2008/2008173.pdfhttp://nces.ed.gov/pubs2009/2009155.pdfhttp://nces.ed.gov/pubs2009/2009155.pdfhttp://nces.ed.gov/pubs2010/2010152rev.pdfhttp://nces.ed.gov/pubs2010/2010152rev.pdfhttp://nces.ed.gov/pubs2011/2011230.pdfhttp://nces.ed.gov/pubs2011/2011230.pdfhttp://nces.ed.gov/pubs2012/2012280.pdfhttp://nces.ed.gov/pubs2012/2012280.pdfhttp://nces.ed.gov/pubs2012/2012174rev.pdfhttp://nces.ed.gov/pubs2013/2013183.pdfhttp://nces.ed.gov/pubs2013/2013183.pdfhttp://nces.ed.gov/pubs2015/2015012.pdfhttp://nces.ed.gov/pubs2015/2015012.pdfhttp://nces.ed.gov/surveys/npsashttp://nces.ed.gov/surveys/npsashttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttp://www.federalreserve./http://www.federalreserve./http://www.oecd.org/edu/Education-at-a-Glance-2014.pdfhttp://www.oecd.org/edu/Education-at-a-Glance-2014.pdfhttps://georgetown.app.box.com/s/tll0zkxt0puz45hu21g6https://georgetown.app.box.com/s/tll0zkxt0puz45hu21g6


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9 Ibid.

10 Ibid.

11 Ibid. For parity with tuition-per-student figures, bor-rowing per student was calculated using an enrollmentfigure that included all students. Because all s tudentsare not required to borrow to finance their education,the student-loan burden of students who did borrowwould be likely higher that the figures listed in thisanalysis.

12 Federal Student Aid, “Federal Student Loan Portfolio:Federal Student Aid Portfolio Summary.”

13 Ibid.

14 Board of Governors of the Federal Reserve, “FederalReserve Statistical Release: Consumer Credit – G.19”;Federal Student Aid, “Federal Student Loan Portfolio:Direct Loan and Federal Family Education Loan Portfo-lio by Loan Status.”

15 Federal Student Aid, “Federal Student Loan Portfolio:Direct Loan and Federal Family Education Loan Portfo-lio by Loan Status.”

16 Ibid.

17 Ibid.

18 Ibid.

19 Federal Student Aid, “Glossary: Default,” available athttps://studentaid.ed.gov/glossary#Default (last ac-cessed January 2015).

20 Federal Student Aid, “U.S. Department of Education Ser-vicing Summit: Portfolio Overview,” available at http://fsaconferences.ed.gov/servicingsummit.html (lastaccessed December 2014).

21 Federal Student Aid, “Repayment Plans,” available athttps://studentaid.ed.gov/repay-loans/understand/plans (last accessed January 2015).

22 Federal Student Aid, “Public Service Loan Forgiveness,”available at https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/public-service (last accessedDecember 2014).

23 Federal Student Aid, “Standard Plan,” available athttps://studentaid.ed.gov/repay-loans/understand/plans/standard (last accessed December 2014).

24 Federal Student Aid, “Graduated Plan,” available athttps://studentaid.ed.gov/repay-loans/understand/plans/graduated (last accessed December 2014).

25 Federal Student Aid, “Extended Plan,” available athttps://studentaid.ed.gov/repay-loans/understand/plans/extended (last accessed December 2014).

26 Federal Student Aid, “Income-Driven Plans,” availableat https://studentaid.ed.gov/repay-loans/understand/plans/income-driven (last accessed December 2014).

27 Federal Student Aid, “Income-Sensitive Plan,” availableat https://studentaid.ed.gov/repay-loans/understand/

plans/income-sensitive (last accessed December 2014).

28 Federal Student Aid, Public Service Loan ForgivenessProgram (U.S. Department of Education, 2013), avail-able at https://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdf.

29 Consumer Financial Protection Bureau, “Public Service& Student Debt” (2013), available at http://files.con-sumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdf.

30 Federal Student Aid, “Public Service Loan Forgiveness.”

31 Federal Student Aid, “Teacher Loan Forgiveness,”available at https://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacher (last accessedDecember 2014).

32 National Center for Education Statistics, “Digest ofEducation Statistics: Table 502.30, Median annual earn-ings of full-time year-round workers 25 to 34 years oldand full-time year-round workers as a percentage ofthe labor force, by sex, race/ethnicity, and educationalattainment: Selected years, 1995 through 2012” (2013),available at http://nces.ed.gov/programs/digest/d13/tables/dt13_502.30.asp.

33 CAP analysis of Federal Student Aid, “Federal StudentLoan Portfolio: Direct Loan Portfolio by RepaymentPlan,” available at https://studentaid.ed.gov/about/data-center/student/portfolio (last accessed December2014).

34 Ibid.

35 Ibid.

36 The White House, “Factsheet: Making StudentLoans More Affordable,” Press release, June 9, 2014,available at http://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordable .

37 Ibid.

38 Office of the Inspector General, The U.S. Departmentof Education’s Administration of Student Loan Debt andRepayment: Final Audit Report (U.S. Department of Edu-cation, 2014), available at http://www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a09n0011.pdf.

39 Ibid.

40 This report addresses repayment under the two pri-mary federal student loan programs. A more limited setof repayment plans is available under the Perkins Loan

program.

41 Deanne Loonin and Jillian McLaughlin, “Searchingfor Relief” (Boston: National Consumer Law Center,2013), available at http://www.studentloanborroweras-sistance.org/wp-content/uploads/File/searching-for-relief-report.pdf .

42 U.S. Department of Education, Student Aid Administra-tion: Fiscal Year 2015 Budget Request (2014), availableat http://www2.ed.gov/about/overview/budget/bud-get15/justifications/aa-saadmin.pdf.

43 Ibid.

44 Federal Student Aid, “U.S. Department of Education Ser-vicing Summit: Default Collection,” available at http://fsaconferences.ed.gov/servicingsummit.html (lastaccessed December 2014).

45 Federal Student Aid, “U.S. Department of EducationServicing Summit: Default Collection.”

46 Federal Student Aid, “Getting out of Default,” availableat https://studentaid.ed.gov/repay-loans/default/get-out (last accessed February 2015).

http://fsaconferences.ed.gov/servicingsummit.htmlhttp://fsaconferences.ed.gov/servicingsummit.htmlhttps://studentaid.ed.gov/repay-loans/understand/planshttps://studentaid.ed.gov/repay-loans/understand/planshttps://studentaid.ed.gov/repay-loans/understand/plans/standardhttps://studentaid.ed.gov/repay-loans/understand/plans/standardhttps://studentaid.ed.gov/repay-loans/understand/plans/graduatedhttps://studentaid.ed.gov/repay-loans/understand/plans/graduatedhttps://studentaid.ed.gov/repay-loans/understand/plans/extendedhttps://studentaid.ed.gov/repay-loans/understand/plans/extendedhttps://studentaid.ed.gov/repay-loans/understand/plans/income-drivenhttps://studentaid.ed.gov/repay-loans/understand/plans/income-drivenhttps://studentaid.ed.gov/repay-loans/understand/plans/income-sensitivehttps://studentaid.ed.gov/repay-loans/understand/plans/income-sensitivehttps://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdfhttps://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdfhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttps://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacherhttps://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacherhttp://nces.ed.gov/programs/digest/d13/tables/dt13_502.30.asphttp://nces.ed.gov/programs/digest/d13/tables/dt13_502.30.asphttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttp://www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a09n0011.pdfhttp://www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a09n0011.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdfhttp://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdfhttp://fsaconferences.ed.gov/servicingsummit.htmlhttp://fsaconferences.ed.gov/servicingsummit.htmlhttps://studentaid.ed.gov/repay-loans/default/get-outhttps://studentaid.ed.gov/repay-loans/default/get-outhttps://studentaid.ed.gov/repay-loans/default/get-outhttps://studentaid.ed.gov/repay-loans/default/get-outhttp://fsaconferences.ed.gov/servicingsummit.htmlhttp://fsaconferences.ed.gov/servicingsummit.htmlhttp://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdfhttp://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www.studentloanborrowerassistance.org/wp-content/uploads/File/searching-for-relief-report.pdfhttp://www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a09n0011.pdfhttp://www2.ed.gov/about/offices/list/oig/auditreports/fy2015/a09n0011.pdfhttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttp://www.whitehouse.gov/the-press-office/2014/06/09/factsheet-making-student-loans-more-affordablehttps://studentaid.ed.gov/about/data-center/student/portfoliohttps://studentaid.ed.gov/about/data-center/student/portfoliohttp://nces.ed.gov/programs/digest/d13/tables/dt13_502.30.asphttp://nces.ed.gov/programs/digest/d13/tables/dt13_502.30.asphttps://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacherhttps://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/teacherhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttp://files.consumerfinance.gov/f/201308_cfpb_public-service-and-student-debt.pdfhttps://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdfhttps://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdfhttps://studentaid.ed.gov/repay-loans/understand/plans/income-sensitivehttps://studentaid.ed.gov/repay-loans/understand/plans/income-sensitivehttps://studentaid.ed.gov/repay-loans/understand/plans/income-drivenhttps://studentaid.ed.gov/repay-loans/understand/plans/income-drivenhttps://studentaid.ed.gov/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47 Office of the Inspector General, The U.S. Departmentof Education’s Administration of Student Loan Debt andRepayment: Final Audit Report .

48 Ibid.

49 U.S. Department of Education, “U.S. Departmentof Education to End Contracts with Several PrivateCollection Agencies,” Press release, February 27, 2015,available at http://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencies.

50 White House, “A Student Aid Bill of Rights: TakingAction to Ensure Strong Consumer Protections forStudent Loan Borrowers,” Press release, March 10, 2015,available at http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-.

51 Office of the Inspector General, The U.S. Departmentof Education’s Administration of Student Loan Debt andRepayment: Final Audit Report.

52 U.S. Department of Education, Student Aid Administra-tion: Fiscal Year 2015 Budget Request.

53 Federal Student Aid, “Income-Sensitive Plan.”

54 U.S. Department of Education, “U.S. Departments ofEducation and Treasury Announce Collaboration withIntuit Inc. to R aise Awareness about Income-Driven

Repayment Options for Students Loans,” Press release,January 24, 2014, available at http://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-aw.

http://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencieshttp://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencieshttp://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencieshttp://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.ed.gov/news/press-releases/us-departments-education-and-treasury-announce-collaboration-intuit-inc-raise-awhttp://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.whitehouse.gov/the-press-office/2015/03/10/fact-sheet-student-aid-bill-rights-taking-action-ensure-strong-consumer-http://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencieshttp://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencieshttp://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencies


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