Business Week Politics & Policy Cheaper student loans. Who new?
“income-based repayment” It lets borrowers • adjust monthly payments down to 15% of their income; • wipe out the debt after 15 years
Bill Clinton: “No one will ever have to drop out of college again for fear they can’t repay their debt. ”
Bill Clinton: “If someone wants to take a job with the modest income their debt obligation will be determined by their salary. ”
It hasn’t worked as well as policy makers has hoped Only about 2. 6% of all borrowers are using income -based repayment. 2 to 3 million further borrowers could qualify for the program.
Why would so many graduates with the option of paying less every month not take it?
They don’t know they qualify Banks don’t tell borrowers about the program. Private banks aren’t required to inform borrowers about it. Government banks must offer income-based repayment.
There were so many borrowers who were turn off Because of too many documents which borrowers have to serve on
Future improvements To move the income threshold down from 15% to 10% for some borrowers Banks will be required to describe the program to borrowers who call up and say they’re having trouble paying
Why students might not be taking advantage of the program Those already in default may have accrued fees and other penalties they feel are unfair Enrolling in income-based repayment means accepting all the debt
Possible problem of the government Borrowers simply brushing off payments altogether
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