New Data Show Borrowers of Color and Low-Income Borrowers are Missing Out on Key Protections, Raising Significant Fair Lending Concerns
10 Pages Posted: 21 Dec 2020
Date Written: November 2, 2020
Abstract
Income-driven repayment (IDR) is a key protection that sets federal student loan borrowers’ monthly bill at an affordable amount determined by their income, not by their loan balance. Research shows that borrowers who enroll in IDR have more success keeping up with their loan payments, pay down their non-student loan debts more quickly, and enjoy positive ripple effects across their financial lives such as improved access to other forms of credit. However, borrowers across the federal servicing landscape—particularly borrowers of color and low-income borrowers—often do not receive critically needed information about IDR when they ask their servicer for help. Using new data from the Federal Reserve Board's Survey of Consumer Finances, we examine how federal student loan borrowers are performing in repayment, who is able to access IDR, and critically, who is not. Our findings show stark racial and socioeconomic inequities in who is accessing federal protections that should be broadly available to federal student loan borrowers, and reveal that many of the most vulnerable student loan borrowers are falling behind in repayment without accessing IDR.
Keywords: student loan, income-driven repayment, education loan, student debt, racial disparities
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