Association for Public Policy Analysis & Management

Panel: Pathways to Repayment: The Impact of Student Loans on Family Financial Security

(Education)

A key driver of financial security and economic mobility is postsecondary education. But the cost of college and the complexity of the student lending apparatus have the potential to hinder rather than help many Americans’ economic trajectory. While most borrowers are paying on time, the Consumer Financial Protection Bureau estimates that more than 1 in 4 student loan borrowers – 10.5 million Americans – are in default or delinquent on their loans.

The substantial number of borrowers who are failing to keep up with their loans has generated concern among thought leaders and policymakers at all levels of government, and the financial consequences of delinquency and default can be devastating, including limiting borrowers’ credit worthiness and potentially hindering their financial stability.

This panel will explore a series of research papers designed to expand the fact base around the intersection of student debt and family financial security and will highlight new data with real-world applications for researchers, advocates, practitioners, and policymakers.

The first paper, “Pathways through Repayment: A Typology of Student Loan Borrowers and Their Repayment Patterns” draws on a forthcoming, nationally representative student loan repayment dataset that tracks borrowers for up to 20 years and classifies their different pathways. This paper creates a new repayment typology – examining actual student repayment behavior across time and including borrowers’ use of specific policy tools (e.g., income-driven repayment and deferments) – that will provide a deeper characterization of their repayment pathways and provide policymakers and researchers with the language and understanding needed to address the $1.3 trillion dollars in outstanding student debt and its effects on individual borrowers.  

The second paper, “The Effect of Student Loans on Family Finances,” will use a different dataset – proprietary Family Federal Education Loan Program (FFELP) portfolio data from TG, one of the largest student loan guaranty agencies in the country – to describe the lifecycle of student loan repayment and the typologies of borrowers with different repayment behaviors. This paper will integrate TG’s administrative data with qualitative survey data to examine borrower knowledge and behavior patterns.

The third paper, “Do Income‐Driven Repayment Plans Help Low‐Balance Borrowers? Examining the Options for Community College Students,” will use the College Scorecard, to which several federal data sources contribute data: Institutional information is derived from the National Center for Education Statistics’ Integrated Postsecondary Education Data System (IPEDS), the Office of Federal Student Aid’s National Student Loan Data System (NSLDS), and the Treasury Department. This paper will focus on a subset of borrowers – those who attended community college – and compare their available repayment options, estimating monthly payments and interest paid under each IDR plan to provide policymakers with data on how program design impacts family financial security.

The discussion will shed light on which populations are struggling the most with default and delinquency – including low-income borrowers, low-balance borrowers, and non-completers – and point to promising areas for policy reform, which will be extremely timely given the growing concern among policymakers about the state of the higher education system.