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Automatic For the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk

Authors: HCM Strategists, Institute for Higher Education Policy, National Association of Student Financial Aid Administrators, New America Foundation, Young Invincibles

Published: March 2014

When borrowers default on a federal student loan, it can have catastrophic consequences. This paper by the RADD 2.0 consortium outlines the need for an automatic income-based repayment (IBR) system, measures the current IBR terms against these principles, examines ways to reduce administrative burdens and discusses the reasons for altering the current IBR formula when implementing auto-IBR.