It’s common for student loans to increase in principal balance over their first few years after origination, due to deferral

The green line, the median of the distribution, by contrast, . The 75th percentile stands at 1.3 in 2019, meaning that more than 25% of borrowers with outstanding student debt in 2009 had a larger student loan balance ten years later. The 90th percentile is much higher: 3.78, almost four times as much debt outstanding in 2019 as in 2009.

That means that over 50% of the borrowers with outstanding debt in 2009 hadn’t fully paid back their student loans ten years later

personal loans under 10000

The lack of progress toward repayment can be caused by a number of different behaviors, as well as any combination of them: delinquency, enrollment in an IDR plan, and taking on more debt after these individuals were first observed in 2009 by re-enrolling, and thereby likely deferring payments on prior student loans. Given the age parameters of the dataset, it’s likely that a number of borrowers in the 2009 cohort were yet to complete their education at that point, and thus subsequently took out more loans. On the other hand, the individuals in this cohort sample don’t change over time. Their minimum age in 2009 was 18, so the minimum age of this group in 2019 is 28. Taking on more debt as they get older makes them less likely to pay off the debt they already had. And that pattern of behavior becomes more pronounced for subsequent cohorts, though this dataset does not directly track them over the full ten-year period that we have for the initial 2009 panel cohort.

That chart plots progress to repayment by what CBO calls the 2012 cohort, which means individuals who began repayment in 2012 (and thus excludes the deferment period on those individuals’ loans prior to that year)

Figure 2-5 from a recent Congressional Budget Office report on IDR shows a similar pattern. That report compares individuals who remained in the standard 10-year repayment plan throughout to those who utilized one of the IDR programs. The former saw their balance decline over time, while, not surprisingly, the latter group’s balance increased. That appears to confirm the interpretation of Figure 1 that a major contributor to the lack of progress toward repayment for many borrowers is enrollment in an IDR plan.

Again, the purpose of IDR is to prevent a liquidity problem by deferring payments. The alternative is much higher delinquency and default rates than there would otherwise have been, so in that sense, the various IDR programs are a success on their own terms. But they are a failure insofar as they give rise to mounting balances over time, rather than facilitating repayment on a delayed schedule more favorable to borrowers. The structure of IDR-capped payments as a percentage of income in the present, possible cancellation of remaining balance in the far future-presumes that those entering into the program will eventually earn a high enough income to cover their full interest and principal loan payments before the date at which their loans would be cancelled. But many borrowers enter into IDR with no intention or prospect of ever leaving it. In fact, the program itself contains an incentive not to exit it: the cancellation at the end, the balance of which the borrower would otherwise be responsible for. That is why a great deal of student debt cancellation has already been committed to and a rising share of new student loans will never be repaid. The policy question is essentially whether to continue to insist on futile interest payments in the meantime, or to recognize that the underlying debts are un-repayable now. Trying to push people out of IDR Orleans cash advance payday loan programs once they’ve structured their lives and careers to conform to their terms, in order to improve the prospects of repayment, as some have proposed, would likely lead to a flood of delinquencies, as better-paid jobs are hardly abundant and available for the asking in a monopsonized labor market. In any case it would be unfair to borrowers who’ve done as they were told by policy-makers, when in reality it was the policy-makers whose failures led to the crisis of non-repayment.