Measuring the Measuring the Benefits of Income- B Based Repayment - - PowerPoint PPT Presentation

Measuring the Measuring the Benefits of Income- B d R t Based Repayment for Graduate and for Graduate and Professional St d t Students

Jason Delisle, Alex Holt, & Kristin Blagg gg New America Foundation

Rationale for Income-Based Rationale for Income Based Repayment

• Limits Downside Risk
• Certainty of Ability to Repay
• How Much Income, and For How

Long Matters Long, Matters

History of IBR

2007

History of IBR

2007 – Income- B d Based Repayment/ P bli Public Service 1992 – 2010 – Pay As Income- Contingent R You Earn Repayment

Pay As You Earn Pay As You Earn

• Why?
• Enacted in 2 Months
• Usually Monthly Snapshot
• But More to the Story

Safety Net or Windfall? Safety Net or Windfall?

• Low-Income See Small Reduction
• Middle-High Income See High

g g Reduction

• Graduate Students Stand to See

Large Forgiveness Even with High Large Forgiveness Even with High Income

• Payments Too Low to Repay

Example Borrowers

Example Borrowers

Examining Graduate Student Examining Graduate Student Benefits

• Not Just High-Income High-Debt

Not Just High Income High Debt

• Modeling Incomes

g

• Degree-Profession Categories
• American Community Survey
• NPSAS Debt

List of Professions

S i l W k

• Social Worker
• Nurse
• Pharmacist
• Lawyer

y

• Engineer
• Accountant

Accountant

• Veterinarian
• K 12 Teacher
• K-12 Teacher
• Speech Pathologist
• Reporter

No Marginal Cost Threshold No Marginal Cost Threshold

• Debt Level When Borrower Will Not
• Debt Level When Borrower Will Not

Incur Incremental Increase in P t f B i M Payment for Borrowing More

• Not Focusing on Forgiveness
• Focusing on Total Payment

Tables (K-12 Teacher) Tables (K 12 Teacher)

Tables (Engineer) Tables (Engineer)

Tables (Lawyer) Tables (Lawyer)

Tables (Veterinarian) Tables (Veterinarian)

Discussion Discussion

• Public Service Loan Forgiveness

Public Service Loan Forgiveness… WOW

• Not Just Grad PLUS Problem
• No Difference for Average vs. High

Debt M t B t G t B fit

• Must Borrow to Get Benefits
• Implications for Scholarships and Aid

Market Response Market Response

How Do We Fix This? How Do We Fix This?

• Cap Public Service Loan Forgiveness

Cap Public Service Loan Forgiveness ($40,000)

• Lengthen Forgiveness Term for High

D bt B (25 Y ) Debt Borrowers (25 Years)

• Use “Classic” IBR for Middle and

Higher-Income Borrowers g