How Many People Have Student Loans Forgiven Under the Income-Based Repayment Plan?

Question:

Dear Steve,

I have been trying to find out how many people have actually completed an Income-Based Repayment plan because the Dept of Education always argues this in an adversary proceeding. Any idea on how many people there are who have actually completed it?

Rodger

Answer:

Dear Rodger,

Nobody. Nada. Zilch, Zero.

The Income-Based Repayment (IBR) plan was introduced in 2007 with forgiveness in 25 years. That means the first person to be eligible for forgiveness would not be until 2032.

Income-Driven Repayment History

1995 – Income-Contingent Repayment (ICR) 25 years.
2007 – Income-Based Repayment (IBR) 25 years.
2010 – Pay As You Earn (PAYE) 20 years.
2014 – New IBR 20 years.
2015 – Revised PAYE 20 years undergraduates and 25 years for graduate students.

If you have not read it yet, take a few minutes to read Why Income Based Student Loan Payments Can Be a Terrible Trap.

The first income program, the ICR, did not start until July 1, 1995. The very first applicant would not be eligible for forgiveness until July 1, 2020.

What is interesting is that back in 1994 when the final rule was published there was a concern that forgiven loans would be a taxable event. “Under current laws, the Internal Revenue Service regards the outstanding loan balance forgiven after 25 years in the ICR plan as taxable income. The Secretary is committed to exploring vigorously a change to current law to provide ICR borrowers complete forgiveness of any unpaid loan balance that remains outstanding at the end of the ICR repayment period.”

As far as I’m aware, after 25-years of trying to change the IRS position, the forgiven ICR loans will be taxable. Just wait until all the newer students enrolled in income-driven repayment programs finally wake up and figure this forgiven debt is taxable.

I have made a Freedom of Information Act request to the Department of Education asking for any data on ICR forgiveness. They tend to drag their feet.