In Conversation: Experts on Student Loan Payments and JPMC Institute Research

September 26, 2019

From left to right: Diana Farrell (JPMC Institute), James Kvaal (Institute for College Access and Success), Jason Delisle (American Enterprise Institute), and Sarah Sattelmeyer (Pew Charitable Trusts).

On July 24, 2019, t­­he JPMorgan Chase Institute held a panel discussion to address the challenges with student loan repayment and default in conjunction with the release of our inaugural report on student loans, Student Loan Payments: Evidence from 4 Million Families.  Erica Deadman, JPMC Institute Consumer Research Lead, kicked off the event by presenting insights from the Institute’s new student loan payments research to provide context for the panel discussion. The report, which utilizes a payment-centric lens, is based on a high-frequency, de-identified dataset composed of 4.6 million families that have made at least one student loan payment between 2012 and 2018. This granular perspective allows us to observe student loan payments and associated financial behavior.

Diana Farrell, President and CEO of the JPMorgan Chase Institute, then moderated a discussion with  expert panelists James Kvaal from the Institute of for College Access and Success (TICAS), Jason Delisle from the American Enterprise Institute (AEI), and Sarah Sattelmeyer from the Pew Charitable Trusts. The panelists highlighted a common challenge of gathering the right data to study and address the current state of student loans, including access to research-ready data sets and collaboration with institutional partners. The panelists also assessed current solutions to assist borrowers in paying off their loans, such as Income-Driven Repayment plans (IDRs), and explored ways in which the discourse around student loan repayment can more holistically address gaps in the current policy framework.

James Kvaal highlighted the importance of research, like that of the JPMC Institute, which delves into how people with student loans interact with the repayment system. The Institute’s work on payment frequency shows that payments are actually inconsistent on a month-to-month basis, meaning that some borrowers may pay a few months of their loan and then stop making payments for a period of time before resuming again. Jason Delisle agreed with Institute findings that show borrowers don’t always or never make loan payments, but rather behave somewhere in-between. He described this “volatile student loan payer” as an emerging identity of many borrowers. Sarah Sattelmeyer additionally noted that anecdotal evidence from Pew studies supports the borrower experience documented by Institute research; the way borrowers interact with the repayment system is not simply a matter of pay or default.

The panel explored how the complexities of the student loan repayment system can be an obstacle to borrowers when paying down their loan. With so many types of repayment plans from which borrowers can choose, it is often difficult for borrowers to understand the differences between options and choose the appropriate plan for their needs. Sattelmeyer explained that it’s also less likely that people identify with a payment plan, the mechanism of getting to their payment, and much more likely that they identify with a payment amount, surmising that both the volume and complexity of these plans can serve as a barrier to borrower enrollment in programs that can offer financial relief.

For example, IDRs offer borrowers flexibility for repayment in theory but require an annual recertification of income to continue enrollment in the program, posing implementation challenges for borrowers.  Diana Farrell noted that, “households experience income volatility month-to-month, not just annually,” citing the Institute’s research related to how families weather income and expense volatility. Panelists debated alternative programs, such as automatic payroll deduction, but pointed out some of the complications in implementation of these as well.

Panelists emphasized the importance of considering the individual when thinking about repayment program design and implementation, highlighting that student loan repayment is just one element of their broader financial lives.  Identifying what types of borrowers experience early payment distress and why they may experience it can help policymakers think about how to get them in the right kind of payment plan at their first point of contact with the repayment system. Indeed, Kvaal stressed that how students experience higher education is not monolithic—and neither are borrowers’ experiences with the student loan repayment system.

As the discussion concluded, panelists suggested tactical changes that could be made to program research, design, and implementation to create administrative efficiencies and simplify the interaction between borrowers and repayment structures, such as building more comprehensive and shareable datasets. However, there are also changes to be made in the way we think about student loans as just one piece of a family’s financial puzzle. By considering families’ overall income volatility as a key piece to the puzzle, we can ensure we are building solutions for student loan debt and repayment that are both targeted and holistic.

We thank each of our panelists and our attendees who contributed to this important and rich discussion. We look forward to continued collaboration and dialogue on this issue.

Viewpoints of our panelists are their own and not representative of their organizations.

The mission of the JPMorgan Chase Institute is to help decision makers, policymakers, businesses, and nonprofit leaders—appreciate the scale, granularity, diversity, and interconnectedness of the global economic system and use timely data and thoughtful analysis to make more informed decisions that advance prosperity for all.