IHEP Releases Paper on Repayment Rates

by: Amanda Janice Roberson, Mamie Voight

Today, the Institute for Higher Education Policy (IHEP) released a paper, Making Sense of Student Loan Outcomes: How Using Repayment Rates Can Improve Student Success. This report (full report and executive summary) presents 11 key recommendations for using and calculating repayment rates, which measure the percentage of borrowers who are actively paying down their student loan debt or the percentage of dollars in active repayment.

Repayment rates have permeated recent higher education policy discussions. More nuanced than cohort default rates (CDRs), repayment rates illustrate how effectively borrowers retire their student loan debt, rather than only whether they avoid default. With this added nuance, repayment rates can promote mindfulness regarding college affordability and student debt, and by disaggregating the rates by economic status, race/ethnicity, and other characteristics, they can shine a light on inequities in college financing that place the greatest burden on underserved students. These illuminating data can help policymakers and institutional leaders redesign policies and practices to better serve students.

To inform this report, IHEP convened institutional practitioners and policy experts to examine repayment rates within the context of institutional improvement, accountability, and information for students and families. Specifically, these experts sought to investigate if and how repayment rates should be incorporated into our postsecondary systems to help advance student success, highlighting the impact of college affordability on all students, particularly low-income students, students of color, and other underserved populations. This paper considers the intricacies of repayment rate measures within multiple contexts, evaluates the most appropriate metric specifications, and identifies potential data quality improvements.

With participants who ranged from policy experts to institutional practitioners, the convening led to the following 11 major findings:

Principles for Using Repayment Rates

1. Policymakers should frame repayment rates not as a measure of academic quality, but as a measure of student and taxpayer protection.
2. Policymakers and institutions should disaggregate repayment rates.
3. Offices within institutions should collaborate with each other to use repayment rate data to better serve their students.

Calculating Repayment Rates

1. Policymakers and institutions should use the borrower as the unit of analysis in repayment rates.
2. Policymakers and institutions should count borrowers in income-driven repayment (IDR) plans as in repayment only if they are reducing loan principal.
3. Policymakers and institutions should calculate separate repayment rates for student and parent loans and should include all undergraduate debt.
4. Policymakers should not hold institutions accountable for substantial consolidated debt accrued at other institutions.

Setting High and Attainable Performance Standards for Repayment Rates

1. Policymakers and institutions should define successful repayment as more than a $1 reduction in principal.
2. Policymakers should use repayment rates to supplement, but not replace, CDRs as an accountability measure.
3. Policymakers should hold servicers accountable for repayment rate performance.

Making Repayment Data More Usable: Recommendations for the Department of Education

1. The Office of Federal Student Aid should improve student loan reports available to the public and to institutions.

These recommendations, detailed further throughout the report, can help policymakers and institutions use repayment rates to implement policies and practices that protect students from overly burdensome debt and help them achieve financial stability after college.