A recent audit found that the number of student loan borrowers enrolled in IDR plans rose 625 percent over a five-year period. 

According to an audit completed by the Department of Education’s Office of Inspector General, the amount of money the government is lending could soon outpace the amount that is being repaid. The report showed that this is largely due to the increasing number of people signing up for income-driven repayment plans (IDR).

Currently, IDR plans cap a borrower’s monthly payment at a percent of his or her discretionary income. Because IDR plans are calculated differently than a typical loan repayment plan, they can give many borrowers some breathing room in their monthly budget. The remaining debt will be forgiven after the borrower makes payments over a period of 10 to 25 years.

According to the audit, the number of borrowers enrolled in IDR plans rose 625 percent over a five-year period. During the 2011 fiscal year, just 700,000 borrowers were enrolled but by the 2016 fiscal year, that number had risen to more than five million borrowers. In particular, borrowers are signing up for the Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE) IDR plans at very high rates.

The inspector general said the department needs to do a better job in communicating the cost of both IDR plans and loan forgiveness programs to policymakers and the public. In particular, the department hasn’t fully communicated what the public service loan forgiveness program will cost taxpayers over time.

New Theory on Student Loan Delinquency

The inspector general said that in light of the impact this growing enrollment could have, it is crucial that the department make more information available on the “…historical and future estimated costs and the associated assumptions, methodologies, and limitations of the information.” The department has been given 30 days to form a correction plan.

In response, senior department official Joseph C. Conaty said that the department is committed to transparency around all of their federal loans programs, “…including trends in repayment options that may impact future estimated costs.”

Income-driven repayment programs were widely expanded upon during the Obama Administration. The belief held by the Obama Administration seemed to be that IDR plans could save taxpayers money by preventing more borrowers from defaulting on their loans. But what they didn’t anticipate was the number of borrowers with very high loan balances who would enroll.

This report comes during a time when lawmakers are considering rewriting the government’s student lending programs. In 2017, House Republicans released the plans for the updated Higher Education Act which would cut loan forgiveness programs as well as reduce the number of repayment plan options. The Senate is currently holding hearings to discuss changes to the legislation.

It remains to be seen what kind of impact this report will have on the federal student loan program.