Ed. Dept. Pushes Income-Based Repayment to Stem Defaults

By Staff

Last month, the Department of Education sent emails to about 3.5 million people with federal student loans in an attempt to publicize the availability of IBR–income-based repayment programs—for borrowers at risk of delinquency or default.

“The campaign will target borrowers whose grace periods will end soon, borrowers who have fallen behind on their student loan payments, borrowers with higher-than-average debts and borrowers in deferment or forbearance because of financial hardship or unemployment,” Brenda Wensil, the chief customer experience officer at ED’s office of federal student aid told MainStreet. She made her remarks in a post on the Information for Financial Aid Personnel (IFAP) Website last month.

The email blast is part of President Barack Obama’s call for the Department of Education to ensure that all federal student loan borrowers are aware of affordable repayment options so, as he put it, “student loan debt does not stand in the way of life’s opportunities.” It is also wrapped into his college ranking plan unveiled in August.

So, how are they doing?

Department of Education spokesperson Jane Glickman did not comment on how long the program would run or what follow-up would be conducted to the initial messages.

“On November 1, the Department began sending emails to borrowers likely to benefit from information about income-driven repayment options,” she said in a statement last week. “Through December 9, 2013, emails have been successfully sent to nearly 2.3 million borrowers. Results thus far have been encouraging and the Department is optimistic that this campaign will contribute to borrowers’ awareness of their repayment options and allow them to make the best decision for their individual situation.”

To say that results were “encouraging” without specific statistics could mean that there are probably no measurable results. But ED may be learning how to walk before it tries to run with an untested project.

“This has never been done before, so it is a good first step,” said Mark Kantrowitz, publisher of Edvisor’s network, a provider of intelligence on student loans. “But it would have been best if they had used standard techniques to measure open rates—for example, including a link to a 1-pixel transparent GIF.”

He added, “I would have suggested having a small control group who did not receive the message, to measure the impact of the message on the number of borrowers who subsequently signed up for IBR. That would enable them to tell whether it had made a difference.”

Enlisting the help of colleges would probably be a good idea. Borrowers may be more likely to open mail—electronic or paper-based–from their colleges than from the Department. On the other hand, borrowers who are default-prone and could benefit the most from income-based repayment are likely among those who dropped out and don’t necessarily have a good relationship with their would-be alma mater.