Income Based Repayment as a Necessary Support for Borrowers from Modest-Income Backgrounds

A recent report by the New America Foundation highlighted a perceived flaw in the Income Based Repayment program, namely that IBR will benefit not only low-income borrowers, but also high-debt, middle income borrowers, i.e. those who earn comfortable salaries but are also saddled by very high debt loads.  So there’s a question about whether a federal program can or should sustain itself when its benefit go to those who make a decent buck.

Heather Jarvis, student debt expert and friend of the PSJD Blog, pushes back on her blog:

The New America Foundation released “Safety Net or Windfall:  Examining Changes to Income-Based Repayment for Federal Student Loans” by Jason Delisle and Alex Holt, arguing that changes to Income-Based Repayment (IBR)should be better targeted towards low-income borrowers rather than “high-income borrowers with graduate and professional degrees.” 

The analysis in the report clearly demonstrates what advocates have long known is a weakness in the IBR program—the lowest-income student loan borrowers need more and different help.

But the wealthy certainly do not benefit the most from Income-Based Repayment.  Wealthy students and families have money to pay for education, do not need to rely on student loans, and neither need nor will receive many benefits from Income-Based Repayment. 

We have a debt-based system of access to higher education.  Unless or until that changes, student loans enable middle- and lower-income students and families to pay for the advanced degrees required to work in many higher-income professions.  Middle- and lower-income students and families must borrow substantial amounts or decide not to pursue advanced graduate and professional degrees.

Income-Based Repayment enables lower- and middle- income students to borrow and successfully repay high student loan balances, and borrowing and repaying a high student loan balance is the path from a lower- or middle-income family to high-income employment.  The person who benefits the most from IBR comes from a family of modest means, borrows a lot to earn advanced degrees, and makes payments based on income every month for many years.  The more that student loan borrower earns, the more he or she will pay. 

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