Comparing the change in benefits for graduate students under the Trump proposal is more straightforward than for undergraduates. It is obvious that the plan reduces benefits relative to the current IBR program because it increases monthly payments by the same amount as for undergraduates, but instead of reducing the repayment period before loan forgiveness, it increases it from 20 years to 30 years.

Higher monthly payments and longer terms must result in a reduction in benefits by making it far less likely a borrower would receive loan forgiveness

We have argued that the changes lawmakers made to IBR in 2010 provided outsized benefits to graduate students relative to the original 2007 version of IBR. While it is obvious the Trump proposal rolls back those benefits, we wanted to know if it would result in a less generous program for graduate students than even the original 2007 version of IBR. That plan set payments higher than the Trump proposal (15 percent of discretionary income) but provided loan forgiveness earlier, after 25 years of payments. Therefore, we include the original 2007 version of IBR as an additional point of reference in our analysis.

To compare the three iterations of IBR plans we will use another hypothetical borrower, one with an initial income of $40,000 and debt from graduate school. We profile two different scenarios for this borrower, one with a loan balance of $50,000, which is in line with the median federal loan balance for a student who completes a graduate degree, and another with a $90,000 loan balance, which is approximately the 75th percentile for debt levels among graduate degree completers with federal debt. 30 Note that borrowers repay their undergraduate and graduate school debt as a combined balance under IBR and the figures cited above reflect a combined balance. (more…)