Automatic for the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk
When borrowers default on a federal student loan, it can have catastrophic consequences. This paper by the RADD 2.0 consortium outlines the need for an automatic income-based repayment (IBR) system, measures the current IBR terms against these principles, examines ways to reduce administrative burdens and discusses the reasons for altering the current IBR formula when implementing auto-IBR.
This paper is the culmination of work by the RADD 2.0 consortium, a group of five student-aid advocacy and research organizations – HCM Strategists, the Institute for Higher Education Policy (IHEP), the National Association of Student Financial Aid Administrators (NASFAA), New America (NA), and Young Invincibles (YI) – with assistance from the Association of Public and Land-grant Universities (APLU), Committee for Economic Development (CED), the National Campus Leadership Council (NCLC), and the National College Access Network (NCAN).
Financial support for this research was provided by a grant from the Bill & Melinda Gates Foundation through the Reimagining Aid Design and Delivery (RADD) project.