Income-Driven Repayment of Student Loans: Logic, History, and the Need for Reform. Research Report

Much of the policy debate emerging from concerns over student debt has focused on the structure and operation of income-driven repayment (IDR). As the number of available IDR plans and the share of borrowers enrolling in these plans has increased, the system has become more confusing and difficult to navigate. IDR has not prevented default problems, as early supporters hoped, or silenced the voices arguing that student debt is destroying the lives of too many borrowers.1 As demands for reducing the loan amounts borrowers must repay get stronger, it is useful to examine the logic behind IDR, the repayment system's strengths and weaknesses, and the reforms that could create a more sustainable and equitable public policy framework. This report reviews the history of support for IDR among policy experts and the gradual and haphazard development of current policies and analyzes potential reforms. It looks at proposals from other observers and analyze of the impacts of alternative approaches on borrowers in different circumstances and taxpayers, discussing the pros and cons of various modifications to the current system.