Julia Barnard, researcher at the Center for Responsible Lending
IDR plans can reduce a person’s monthly federal student loan payment to a more affordable amount based on that person’s income and family size. The plans can be a lifeline for many borrowers. But making sure the plans are more equitable gets complicated quickly.
“This week’s rulemaking talks on IDR make it clear that many negotiators are disappointed with the scale of the department’s proposal, especially the number of borrowers who would be covered,” said Dr. Kyle Southern, director of accountability at The Institute for College Access and Success (TICAS), a nonprofit research and advocacy organization that focuses on higher education equity.
Reduced payments with IDR are based off of a formula that determines a person’s discretionary income, though what goes into that formula and what discretionary income actually means for everyday borrowers has been a sticking point. Depending on the type of IDR plan, a borrower’s payments can be 10% to 20% of that discretionary income.
“We know that 10% of discretionary income is quite high for many families,” said Julia Barnard, a researcher at the Center for Responsible Lending, a nonprofit organization that produces research and policy advocacy to protect consumers from predatory lending.
On the campaign trail, President Biden proposed lowering that to 5% of a person's discretionary income, which could reduce a monthly loan payment by 50% or more for borrowers. That has not happened yet, however.
Then there’s the problem of an IDR plan’s timeline, said Barnard. A plan can last 20 to 25 years before federal student loan debt is forgiven. Several negotiators in rulemaking as well as advocates like Barnard have called on that timeline to be meaningfully shortened, which has also not happened so far during rulemaking.
“What we also know from research is that the 20-to-25-year-horizon is extremely long, almost the length of a mortgage, and that has profound psychological as well as physical health impacts on people,” said Barnard, adding how it is tough for many people to watch their student debt balance balloon over two decades with little hope of repaying it. “Borrowers don’t see a 20-year horizon as generous.”
Some negotiators pointed out as well how IDR continues to exclude borrowers of parent PLUS loans, for instance. Those are federal loans that parents of dependent undergraduates can take out to help their kids go to college. Barnard added how such exclusions particularly impact marginalized communities, namely Black students and their families.
“Student debt disproportionately falls on people who didn’t have the family wealth to not take out loans,” said Barnard, stressing racial inequities in that wealth gap. “We also know that systemic discrimination means that Black and Latinx people don’t get paid the same amount for the same degree. That makes repaying student debt even more burdensome. So, we’re trying to position student debt as really a social justice, racial justice, and civil rights issue.”
As the extensive rulemaking process continues, the Biden administration could still change course and revise IDR more. Some rulemaking progress that has already made in other areas, advocates say, includes reaching consensus on how student loan discharges for people with total and permanent disabilities will work.
“They’re making every effort on every other front,” said Barmak Nassirian, vice president for higher education policy at Veterans Education Success, a bipartisan advocacy and research group focused on improving higher education quality for veterans and military families. “Even this IDR option will be somewhat better, but this is not the opportunity we thought we would have to really address the problem. The department is trying, and I appreciate that. It’s just not enough yet.”
Barmak noted chances for the public to comment on proposals out of rulemaking could be important ways for more borrowers to share their stories and possibly sway ED in another direction around IDR.
“I think the administration itself will need to do some soul-searching to see if what they are doing is adequate,” said Nassirian. “We’re not attempting to sell them a different set of goals. We’re hoping to help them with the goals they have already articulated.”
Recently, ED also announced another rulemaking period that will start in January 2022 with an Institutional and Programmatic Eligibility Committee. These sessions will work on several topics, including the 90-10 rule regarding for-profit institutions.
Yet to Barnard, the deeper challenge beyond rulemaking remains wiping out student debt altogether.
“We believe the affordability crisis is catastrophic enough to cancel student loans,” said Barnard. “This rulemaking is, of course, an opportunity to provide relief to those in the federal student loan program, and federal loans represent about 90% of all student loans, so that certainly is important. But we’d like to see a lot more.”
Rebecca Kelliher can be reached at [email protected].
