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Student debt is on everyone’s minds these days, so it’s no surprise that solutions are being bandied about from inside policymaker circles, to the higher education community, to the private sector’s innovative student loan assistance employee benefit packages. Income sharing agreements are one idea that’s gaining publicity, but as I argue in my op-ed in The Hill, ISAs are a dangerous distraction from the real national conversation we should be having about higher education as a public good.
ISAs also won’t do anything to help the 42 million Americans with existing student debt. A more practical solution for these folks is connecting them with the myriad repayment options already in existence that can offer some relief.
That’s why we were so pleased to hear about the White House Student Debt Challenge and were among the first to pledge to join this initiative to spread the word about income driven repayment options. Last month, the White House issued a call to action for colleges, universities, non-profits, businesses, state and local governments, and other employers to help more borrowers better understand their options, and to take action to enroll those borrowers in IDR plans so they can manage their monthly payments and avoid delinquency and default.
Often, student loan borrowers wind up defaulting not because there weren’t any payment options available, but because they never received the proper support and guidance to help them navigate said options. For example, did you know that despite five different income-driven repayment (IDR) options in the federal student loan program, one in four of the 42 million Americans with student debt are in default or delinquent? And last year the U.S. Government Accountability Office found that while 51 percent of Direct Loan borrowers were eligible for Income-Based Repayment, only 13 percent were actually participating.
To be fair, the number of IBR enrollees has grown since the data used for that GAO study, thanks to pressure from the Obama administration to raise greater awareness. But there is still much work to be done. At our organization, we’ve long lamented that so many struggling borrowers could be taking advantage of income driven repayment (IDR) to get their student debt under control – if they only knew how.
Here at ASA and SALT, we’ll be focusing our IDR awareness campaign on an often overlooked population of borrowers: those over the age of 40. Contrary to popular assumptions, the majority of student debt is held by borrowers over the age of 30 and over one third of all student debt is held by borrowers 40 and over, according to the New York Federal Reserve. The aging of student debt in the U.S. is a combination of many factors in recent years: the rise of the nontraditional, adult learner who turns to college later in life; a marked increase in how much students are borrowing, which has resulted in the creation of longer payback terms; and a huge uptick in parent loan borrowing.
As we highlighted in our paper Retirement Delayed, borrowers holding on to their student debt much later in life face serious challenges to their financial security headed into retirement – creating a situation that has significant ramifications for the national economy and for us all. It’s critical that we do all we can to help older borrowers manage their education debt in balance with all their other financial priorities.
In the days ahead, I look forward to sharing more details about our pledge to “message a million,” by spreading the word about IDR to at least 1 million student loan borrowers. In the meantime, we urge any and all partners in our SALT financial education program to join with us and take the pledge to raise awareness among alumni and employees. Together, we can make sure that a simple thing like lack of information doesn’t stand in the way of borrowers’ long-term success.