The Government’s Plan to Reduce Student-Loan Defaults Helps Borrowers Who Need It Least
The Obama administration has sought to stem a surge in Americans defaulting on their student loans by slashing borrowers’ monthly payments through so-called income-based repayment plans.
Enrollment in the plans—which set borrowers’ bills as a small percentage of their incomes—has soared over the past three years. But new research shows there’s a flaw in the administration’s strategy: The program isn’t reaching many borrowers who need it the most.
A study published Tuesday by the Urban Institute, a left-leaning think tank, shows that the programs have only modestly reduced defaults. The reason: Borrowers who have enrolled in the plans are the least likely to default in the first place.