The numbers around student loan repayment are grim and getting worse. As of the beginning of this year, about 25% of student loan borrowers were delinquent while 9 million or roughly 11% were in default. While there are many changes coming that seem less borrower friendly, the poor repayment performance cannot be attributed to them. So, what’s going on here?

To answer that question, we’ll look back at the many programs implemented in the last 30 years to ease the repayment burden.

Between 1994 and 1998 many new programs were introduced to help student loan borrowers find an affordable monthly payment over the long term. These included graduated and extended repayment options in both the standard repayment option (10 year) and in consolidation loans. The first income-based repayment plan, Income Contingent Repayment (ICR) was also implemented during this period. After a lull of about ten years, the rapid-fire changes to repayment options resumed with Income Based Repayment (IBR), New IBR, PAYE, and REPAYE being implemented between the years 2009 and 2015. Each program improved affordability for most borrowers, and eligibility to participate was based on the year(s) in which the student initially borrowed federal loans. In 2023, the Saving on a Valuable Education or SAVE plan was implemented. Existing REPAYE borrowers were automatically transitioned to it, and other borrowers were invited to change plans to take advantage of the additional flexibility and protections offered. In 2025, the Repayment Assistance Plan (RAP) was created and will be available beginning July 1, 2026. After three years of legal wrangling, SAVE has been officially eliminated and borrowers using that plan will have 90 days starting on July 1, 2026, to enroll in a different plan. Further, the remaining income-driven repayment plans other than RAP will be eliminated effective July 1, 2028, so those borrowers will need to transition to RAP to continue in an income-driven plan.

Clearly one reason borrowers are defaulting at an alarming rate is straight up confusion. Student loan repayment has become a political football with both teams intercepting the other’s passes, but neither team holding possession of the ball long enough to score. It would be bad if only the borrowers were confused by this ever-changing landscape, but it has become increasingly difficult for those who counsel borrowers to keep up, leading to borrowers being misinformed as well as confused. So, perhaps the move toward just one income-driven repayment plan is not necessarily a bad thing even if the terms aren’t as borrower friendly as those preceding it.

Another reason for the higher default rate is the recent prioritization of not having to repay. The big student loan stories in the media over the last several years have focused on how borrowers can avoid repaying their loans like Borrower Defense to Repayment rules and loan forgiveness. The prevailing attitude amongst borrowers seems to be that having to repay any amount is a burden and the potential of having to contend with the debt for decades is too stressful. In fact, a recent survey revealed that some borrowers who have been able to obtain what seems to be an affordable monthly payment and will qualify (eventually) for loan forgiveness are even fleeing the country to avoid the debt. Of course, in the higher education world we know better. For laypeople, the assumption is it will be treated like credit card debt and will eventually be written off and reported to the (American) credit bureaus.

Students, particularly those in graduate and professional programs, are borrowing more than they can reasonably afford to repay. This situation will worsen when the new Stafford annual and aggregate limits result in students turning to private educational loan programs. The challenge is to help students envision what life will be like after college with excessive debt to make sure they are willing to make that tradeoff. For some, delaying things like home ownership will be worthwhile to be able to attain their career goals, but for others, it may not be the case. Students should not be considering the implications of their borrowing only after graduation when it is too late.

Finally, the repayment plans themselves need to be based in reality rather than on buzz words that are appealing to one voter block or another. They need to recognize that there will be borrowers for whom even $10 per month is not affordable if they want to also pay rent and eat. Further, as we mentioned earlier, there is too much focus on the forgiveness aspect, which encourages borrowers to pay the smallest amount possible to have the largest portion of their loan forgiven. In some cases, extending repayment to qualify for loan forgiveness is not in the borrower’s best interest and will result in them paying more over the life of the loan than if they just paid it off in ten years.

As higher education administrators we can’t solve all these issues ourselves, but we can help our students better understand their obligations and make more informed decisions about borrowing by doing the following:

  1. Create supplemental, program specific entrance and exit counseling materials. The repayment experience of teachers and social workers is probably going to be quite different than that of engineers and MBAs. Entrance counseling should highlight what a ‘normal’ monthly payment will be versus the average monthly earnings of people in that field.
  2. Hold events or meetings that compel students to consider their borrowing at different points during their program. If there are not resources to do so for all students, prioritize the high-risk students by program, debt load, or economic background. Not all students will receive appropriate guidance from their families, so administrators need to provide it.
  3. Partner with other administrative offices or with academic programs to include financial education as an integral part of the overall educational program. No one pays student loans in a vacuum, so the better students become at managing all their expenses, the easier it will be when they have to start repaying student loans.
  4. In programming, including entrance and exit counseling, focus on getting to an affordable monthly payment rather than payment avoidance or the total amount to be repaid to reduce stress. Point out that the ramifications of default, even for those who choose to leave the country, are far more stressful. Highlight the benefit of successful student loan repayment in building a better credit score and the benefit to taxpayers when federal student loan programs can largely pay for themselves.

These days, student loans are so often seen as a burden rather than a vehicle that allows students without means to enroll in a program of higher education and have a better shot at reaching their career goals. Students who make informed decisions about borrowing and plan for the inevitability of repayment are much more likely to appreciate the resource than resent it. Our challenge is to guide students to this understanding.

Another challenge is how to facilitate this on-going conversation with students, so they are in a good place both emotionally and financially to succeed during repayment. The Higher Education Assistance Group’s interim staffing solutions can save the day by getting the day-to-day work of your office done while your team is creating new programming to ensure student success. Email us at info@heag.us to learn more.

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