CBO uses several measures of student loan repayment to describe borrowers’ outcomes from 2009 to 2019, before payments were suspended during the pandemic.
Recent changes to the federal student loan program will affect student loan borrowing, repayment, and debt. Payments on student loans, which were suspended during the coronavirus pandemic, restarted in October 2023. A new repayment plan introduced in August 2023 will significantly reduce interest accrual and payments for certain borrowers. And lawmakers have expressed interest in changing federal measures of student loan repayment that are used to hold institutions accountable for the quality of education they provide.
Understanding patterns of student loan repayment before payments were suspended during the pandemic can shed light on how those recent and proposed changes to the federal student loan program might affect students, educational institutions, and the federal budget. To that end, the Congressional Budget Office identified a representative sample of federal student loans whose repayment periods began between July 2009 and June 2013 and examined several measures of their progress through 2019.
Loan Repayment. In the first six years after repayment began, the balances of nearly a quarter of loans fell by 50 percent or more, and a modest share of loans were paid off entirely. However, balances increased—sometimes substantially—for 57 percent of loans. On average, loans spent 45 percent of months in repayment status (during which payments were expected—including zero-dollar payments for borrowers in certain repayment plans), and borrowers made payments greater than $10 in only 38 percent of the months in which a payment was due.
Loan Default. The share of loans in default during any given month rose from 4 percent one year into the repayment period to 12 percent after three years and 16 percent after six years.
Differences Among Repayment Plans. Loans in repayment plans whose monthly payments depended on borrowers’ income were repaid more slowly but were also less likely to default.
Differences Among Borrowers. Students who received Pell grants repaid their loans more slowly than students who did not, and those differences increased with time. Students who ultimately attained less schooling showed slower repayment than those who attained more schooling.
Differences Among Institutions and Academic Programs. Repayment outcomes differed substantially among institutions, even for study in a common field. Students who attended for-profit institutions, two-year public institutions, and institutions with lower degree-completion rates repaid their loans more slowly. Positive repayment outcomes were more likely in academic programs leading to advanced degrees.
Short-Run Versus Long-Run Outcomes. Repayment outcomes after three years were highly indicative of outcomes after six years. But the degree to which loans had been paid down was more predictive of later repayment outcomes than whether or not the loans went into default.
