Repayment rates can help explain student loans

Policy experts and institutional practitioners explore repayment rates as an important debt measure, lay out a vision for best practices

loan-repaymentColleges and universities have for years used cohort default rates (CDRs) to evaluate how affordable their schools are and how well their students do once they leave campus.

But with concerns growing about student debt, policymakers, institutions and students and families are looking for better information on college affordability and student borrowing. For them, student loan repayment rates – alongside default rates – are a more nuanced way to understand all possible loan repayment outcomes.

But how can repayment rates be used most effectively? How well do they illustrate the progress borrowers are making paying down their loans?

A new report by the Institute for Higher Education Policy examines repayment rates within the context of institutional improvement, accountability and consumer information. IHEP convened institutions and policy experts to investigate if and how repayment rates should be incorporated into our postsecondary systems to help advance student success.

The report, Making Sense of Student Loan Outcomes, highlights 11 major findings from the convening, divided into four areas:
• General principles for repayment rate usage
• Calculation specifications
• Considerations for setting high and attainable performance standards, and;
• Recommendations for the Department of Education

“Repayment rates are more than just interesting data; they highlight the impact of college affordability on students, particularly low-income students, students of color and other underserved populations. And if used well, they can shine a light on inequities in college financing,” said Michelle Asha Cooper, president of IHEP. “These illuminating data can help policymakers and institutional leaders redesign policies and practices to better serve students.”

Repayment rates – which measure the percentage of borrowers who are paying down their student loan debt or the percentage of dollars in active repayment – are quite the hot topic these days, particularly since the U.S. Department of Education included them as a core measure on the revamped College Scorecard.

IHEP has been paying close attention to and evaluating their effectiveness for some time. With the release of Making Sense of Student Loan Outcomes, IHEP intends to spark conversation on the high-level uses and vision for repayment rates, and recommend how the rates should be used – and by whom.

Material from a press release was used in this report.

Laura Ascione