CFPB examines student loan borrowers enrolled in IDR plans

Federal Issues CFPB Student Lending Income-Driven Repayment

On November 22, the CFPB released a new Data Point report from the Office of Research titled “Borrower Experiences on Income-Driven Repayment,” which examines, among other things, the types of student loan borrowers who participate in income-driven repayment (IDR) plans, the evolution of borrower delinquencies, and borrower experiences with enrollment recertification processes. According to the Bureau, while student loans are currently the largest non-mortgage form of debt held by U.S. consumers, “there remains limited evidence of how this growing debt burden affects the use of other financial products and services.” Key findings of the report include:

• Delinquencies decreased 19 to 26 percent after one year into IDR enrollment for borrowers who received partial payment relief as compared to the quarter before enrollment, and the share of borrowers actively in repayment on their loans was 27 percent higher at the end of the first year of being enrolled in IDR than prior to entering IDR.
• Delinquent borrowers who enrolled in IDR showed a 17 percent reduction in their delinquencies on other credit products, however, the Bureau noted that “one in five such borrowers were still behind on their payments on these other credit products one year later, reflecting persistent financial struggles for some borrowers.”
• Roughly two-thirds of borrowers who recertified their IDR enrollment for a second year did so either immediately or within two months after the initial IDR period ended, with an additional 12 percent entering forbearance or deferment. The Bureau stated that borrowers who do not recertify on time after their first year may face persistent difficulties, and reported that delinquencies more than tripled for these borrowers.
• More than 80 percent of borrowers enrolled in IDR “sought out prolonged payment relief beyond a single year.”

According to the Bureau, the data “helps the Bureau and other researchers and policymakers understand how consumers repay their student loans and how that behavior affects their use of other financial products.”