The Math on IBR � The Quick and the Ed

The Math on IBR � The Quick and the Ed

The Math on IBR

by Erin Dillon

Daniel Bennett from the Center for College Affordability and Productivity writes in an op-ed atForbes.com that income-based repayment is a “sweet deal for students”. Sure, IBR may sound like a great bargain for students–you pay less than you normally would each month and then taxpayers cover any remaining balance after 20 years. But the reality is a little different.
To demonstrate his point, Bennett includes a chart in the op-ed showing the monthly “savings” for students who enter IBR based on their income and debt levels. But what the chart doesn’t include is the cost of the extended repayment term (20 years, not 10 years) and assumptions about increases in salary over 20 years.
To get the IBR “sweet deal”, students need to maintain consistently low wages for 20 years. Getting a few thousand dollars in loan forgiveness is probably not worth a career of low wages for most people. And with the extended repayment term students actually end up paying more total because of accrued interest.
The math changes, of course, for students entering public service. For those borrowers, they simply need to maintain a low-enough paying job for 10 years to qualify for loan forgiveness. This increases the cost to taxpayers, but it also may prevent high debt levels from discouraging students from entering public service – a