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The benefits of a new income-driven repayment plan for federal student loans are largest for those who used the loans to pay for undergraduate degrees, especially certificates and associate degrees, according to a recent report by the Urban Institute.
The report uses College Scorecard data to model how the new plan would affect loan repayment patterns for more than 25,000 postsecondary programs.
According to the report, borrowers who complete certificates will typically only be required to pay back 35 percent of their original balances under the Saving on a Valuable Education (SAVE) plan. Those who complete associate degrees would repay 69 percent. Under prior IDR options, the typical borrower in both groups would generally repay loans in full.
Programs in the liberal arts, psychology, medical assistance and teaching are expected to have the largest decrease in the number of full loan repayments. Registered nursing, finance and engineering programs, on the other hand, will see the smallest changes. A prior Urban Institute report examined how much borrowers who go into two particular professions, teaching and social work, could benefit from SAVE.
The SAVE plan will become a “more central part” of how the government finances higher ed, the report states, and could encourage students to “err on the side of borrowing more.”
“That will require a major change in how policymakers, students, and colleges approach student debt,” the report reads. “Institutions may also use the SAVE plan to underwrite low-quality programs where graduate earnings are consistently low. Policymakers may need to consider new quality assurance measures in response.”
