The impact of filing status on student loan repayment plans

January 1, 2021

By Nancy B. Nichols, Ph.D., and Irana J. Scott, Ph.D., The Tax Adviser

The volume of student loans continues to grow, as the number of borrowers and the amounts borrowed have increased significantly over the past decade. During the 2018-2019 academic year, the federal government issued $76 billion in new student loans to 7.6 million students.1 As of December 2019, outstanding student loans issued or guaranteed by the federal government totaled $1.5 trillion.2

The volume of student loans continues to grow, as the number of borrowers and the amounts borrowed have increased significantly over the past decade. During the 2018-2019 academic year, the federal government issued $76 billion in new student loans to 7.6 million students.3 As of December 2019, outstanding student loans issued or guaranteed by the federal government totaled $1.5 trillion.4

Income-driven repayment plans are available for federal student loans for borrowers incurred after a certain date. The plans take into account family size and income and generally limit payments to 10% of discretionary income (defined below), but no more than the current payment amounts. Unlike traditional student loans, which are usually repaid over 10 years, income-driven repayment plans are usually available for 20-to-25-year terms and may in some cases be forgiven at the end.

Both the number of borrowers and the volume of loans in income-driven plans grew significantly from 2010 to 2017. The percentage of borrowers using income-driven plans grew from 11% to 24% for those with undergraduate loans and from 6% to 39% for those with graduate loans. The Congressional Budget Office (CBO) estimates that in 2017 approximately 45% of direct loan balance repayments used an income-driven plan, up from about 12% in 2010.5

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