Increase In Income-Based Student Loan Repayments

More borrowers take advantage of this repayment option for student loans

Shaun Plum
MoneyTips Contributor

Borrowing Student Loans

Increase In Income-Based Student Loan Repayments
June 21, 2016

New data released by the Department of Education reveals several continuing trends regarding federal student loans. This report includes statistics up to the beginning of the second quarter of 2016 and only addresses Federal Direct Loans. Overall, the data shows a slight increase in loan repayments, but that increase is balanced by an increase in the number of borrowers who have defaulted.

According to the data, 53 percent of all federal student loans are currently being repaid. Last year, 52 percent of loans were being repaid. One reason for this slight increase is that more borrowers have changed their student loan repayment plan to the income-based option. These plans adjust the borrower's monthly payment to an amount commensurate with their income.

Income-based repayment allows borrowers to drop their monthly student loan payment to a fraction of what it would be as a fixed amount or, for those with no or little income, even eliminate it altogether until their income situation changes. The greater the financial hardship, the lower the borrower's payment will be. Currently, 38 percent of all federal student loans were on an income-based plan. Last year, 31 percent of loans were on one of these plans.

Another reason more borrowers are moving to this option is the forgiveness component. After a set amount of time, the remaining balance of the loan is forgiven, allowing borrowers to save thousands on their education.

Find out quickly at what rate you can refinance your student loan.

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