“the Influence Of Student Loans On Graduate School Choices” – In a 2019 poll conducted by the public opinion and market research firm SSRS for The Pew Charitable Trusts, 7 in 10 Americans said taking out a student loan is a reasonable choice given the benefits of a college degree, but 89 percent also expressed concern about it what people’s ability to repay these debts. And they have reason to worry: Nearly 20 percent of the nation’s 43 million federal student loan borrowers are in default — usually defined as having gone at least 270 days without making a payment — and millions more are late.

The research provided an insight into the characteristics of borrowers who have the most difficult repayment of student loans, but less is known about why their personal experiences with the repayment process also struggle. This knowledge gap makes it difficult for policymakers to get a complete picture of why some people are successful in the repayment system while others fall behind, or to readily identify which current policies may not be working as planned and which reforms are needed to better support borrowers.

“the Influence Of Student Loans On Graduate School Choices”

This report seeks to shed light on these questions by analyzing the responses given during 16 focus groups, conducted by Pew in eight cities with more than 150 student loan borrowers, in late 2018 and early 2019. Researchers classified participants into four categories, based on self-reported information about their repayment experiences (see “About the Analysis” and Appendix B for more information): People who were on track to repay their student loans; those who were not on track to repay, regardless of the size of their balances (generally, off track); those who were off track and had a balance of $40,000 or more (high balance, off track); and people who were not on track and had a balance of $10,000 or less (low balance, off track). The research team conducted four focus groups with each category of borrowers.

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Taken together, these focus groups suggest that many participants found the repayment system difficult to navigate, experienced a range of challenges repaying their loans, and did not receive – or were unable to access – quick and lasting help, particularly when they were financially stressed. Borrowers in these groups experienced some level of anxiety and frustration about their balance sheets. For example, they felt like they couldn’t make progress with their payments and were forced to make difficult compromises to manage their finances. Those who struggled to access longer-term solutions instead turned to shorter-term ones.

With the student loan repayment system under pressure as more borrowers struggle to repay, the focus group’s insights into the barriers borrowers face should provide federal policymakers with important guidance as they seek to reform the higher education financing system. These findings, combined with existing quantitative data, suggest four actions that the Department of Education and the US Congress could take to facilitate successful repayment:

Student loan borrowers in the U.S. face significant challenges, including delinquency, defaults, and growing balances, as they navigate the complex repayment system. This report aims to help shed light on specific points where borrowers run into trouble and identify actions policymakers can take to promote successful repayment among the millions of Americans with student debt.

Between December 2018 and January 2019, Pew conducted 16 focus groups with 152 borrowers in eight cities—Alexandria, Virginia; Detroit; Kansas City, Missouri; Memphis, Tennessee; Miami; Phoenix; Portland, Maine; and Seattle. Researchers classified participants into four somewhat overlapping categories based on self-reported information about their repayment experiences (see Figure 1 and Appendix B):

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The researchers conducted four focus groups with each category of borrowers. The purpose of the focus groups with on-track borrowers and off-track borrowers in general was to better understand why some people successfully navigate the repayment system but others fall off track.

Even people who pay on time sometimes experience negative financial outcomes, such as rising loan balances that result from payments that don’t keep up with the interest that accrues and capitalizes on their loans.

(Although many borrowers face the financial burden of rising balances, those with high balances often feel it acutely, even if they avoid default.) That’s why Pew conducted focus groups with both high- and low-balance, non-compliant borrowers. understand the different realities each of these groups face.

“On track” and “off track” are the names the researchers assigned to the categories based on borrower responses to questions in the screening guide and to facilitate communication of study results. However, these names do not cover all aspects of the borrower’s repayment experiences. For example, some borrowers in the on-track focus groups indicated that they were either late on their loans and had difficulty repaying them, and a few in the off-track groups indicated that some aspects of the repayment system worked well for them.

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This report highlights borrowers’ own words using a selection of borrower quotes, some of which may indicate a misunderstanding of the repayment process. Furthermore, many focus group participants used the terms “deferral” and “forbearance” interchangeably, so they are also used interchangeably in this report. Additional offers are available in Appendix A.

Most federal student loans are administered by third-party companies known as servicers. These companies are expected to perform functions such as collecting payments and helping borrowers choose a repayment plan and access payment pause tools in accordance with federal rules, regulations and guidelines.

Borrowers who graduate, drop below half-time or drop out of school automatically get a six-month grace period before their first repayments are due.

Unless they choose another plan, borrowers begin repayment in the standard repayment plan, which has fixed payments over a 10-year period so that borrowers will repay the principal and interest on their loans in full over that period provided payments are made in full and on time.

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If eligible, borrowers also have the option of joining other plans that reduce monthly payments or extend the repayment period, but these plans can increase the interest charged and thus the amount repaid over the life of the loan.

Graduated plan: This program allows borrowers to initially pay lower monthly payments than the standard plan, but the payment amount increases every two years over 10 years so that borrowers will repay the full principal and interest over that period, provided the payments are made fully and on time.

Extended Plan: Borrowers with balances above $30,000 can enroll in extended or extended graduated plans, modified versions of standard and graduated plans that generally support repayment over 25 years.

Income-Based Plans: These plans have monthly payments that are calculated based on the borrower’s income and family size, which must be recertified annually.

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Congress authorized the Department of Education to forgive any remaining balance after 20 or 25 years of qualifying payments.

A set of tools, known as deferrals and forbearances, are available to support borrowers who need to defer or suspend their payments. Eligible borrowers include those who are enrolled at least half-time in school, unemployed, disabled, serving in the military or experiencing economic hardship, among other reasons.

Forbearance: Borrowers with certain types of loans may be able to pause their payments and avoid accruing interest during the grace period.

Most borrowers who use deferments do so while enrolled in school or because of financial hardship, such as unemployment.

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Waiver: In general, deferred deferment loans accrue interest. Borrowers can opt for discretionary discounts—typically offered during periods of economic hardship—or their servicers can place them on mandatory discounts. Servicers may apply deferrals while they process income-based repayment requirements and other loan-related requirements or while borrowers work to submit the necessary documentation. In addition to pausing future payments, forbearance can be applied retroactively to make unpaid bills current so that borrowers can, for example, enroll in income-based plans.

Borrowers who qualify for deferment or forbearance can typically defer their payments for up to a year (although some borrowers use these tools for shorter periods) and up to three years using each type of tool.

With some types of deferments and many types of forbearance, when the period of suspended payments ends, the unpaid interest on the loan is capitalized—that is, it is added to the principal and increases the amount subject to interest.

(See “How is Interest Accrued and Capitalized on Federal Student Loans?” for additional information on interest and capitalization.)

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When borrowers default, they become delinquent on their loans, and when they reach 270 days without payment, they default.

Student loan defaults are usually reported to the national credit bureaus after 90 days of nonpayment. Most loans today remain with servicers between 271 and 360 days past due. The loans are then returned to the Department of Education, which generally assigns them to a private collection agency. Borrowers can make payments during the carryover period to avoid being sent to collections.

Additionally, and unlike most other types of debt, federal student loans continue to accrue interest during defaults and are rarely discharged in bankruptcy.

In addition to servicers, various entities may contact borrowers regarding their federal student loans while they are in repayment. For example, those with loans before 2010 (when the Ministry of Education became

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