"The student loan repayment system is overly complicated," says Heather Jarvis, a student loan expert who provides trainings on loan repayment. "Students don't really have access to personalized advice about the best way to approach their student loan debt."
Daren Briscoe, acting press secretary for the Department of Education, acknowledges that keeping students abreast of their options is hard.
"It is a difficult challenge to ensure that borrowers have the right information at the right time to assist them with making better college financing and loan repayment decisions, and we are continuously working to improve our communication with students and borrowers to accomplish that goal," he says in an E-mail.
Until recently, the process of getting approved for reduced loan payments was decidedly 20th-century, with some borrowers having to fax or mail their most recent tax returns, then wait for weeks or even months in order to be approved. Now, the government offers an online application that automatically allows borrowers to link to their IRS information. Briscoe says that he believes that streamlining the process has boosted participation and believes that it will continue to grow.
Why does it matter? For borrowers like Terrell, it can mean more disposable income for making everyday purchases.
"I would have been able to squeeze my payments in, but I wouldn't have the buying power I have right now," she says.
That means that programs such as IBR could provide a modest boost to the economy.
"There people that are able to service the debt but they might be paying more than they necessarily need to toward that. [If] they could have it reduced, then it would up their spending," says David Nice, associate economist at Mesirow Financial, a Chicago-based financial services firm. He says that would mean an economic boost "at the margin" — perhaps nothing that would fundamentally change the economy, but could mean more house payments and retail spending.
Helping students with towering debt levels also could help young borrowers struggling to get into the job market, Chopra points out, as many employers perform credit checks on potential hires.
Then again, lower payments are only going to help people who can afford the lower payments, Nice cautions.
"If you can't pay $5, and you have no money, you still can't pay $2," he says.
Aside from that, it also means a longer repayment period. The IBR program extends out for up to 25 years the payments on a loan that normally would only have gone on for 10 years under standard repayment. That can mean more money paid over time, though the program does forgive balances remaining after 25 years.
It also doesn't mean that payments will be at bargain-basement levels, Terrell says.
"It's more than my mortgage payment. It's the most expensive bill I have," she says. And as she is expecting her first child soon, Terrell says she will request yet smaller payments to compensate for her smaller pay during maternity leave.
There are also plenty of people that the system does not help — those with private loans, for example.
Jarvis believes that the problem of high student loan payments can't simply be fixed by giving people slightly easier repayment terms.
"Our system of access to education is a debt-based system right now, and that's really where the problem should be addressed," Jarvis says. Student loans, she says, were originally intended to level the playing field and allow students of modest means to get to college. Yet she notes: "We still see huge [educational] gaps between people who come from backgrounds of privilege and people who do not. ... This is a problem of our own creation."