Borrowers who are unable to make their payments on their federal student loans have an option: income-driven repayment (IDR). In lieu of the standard repayment plan, borrowers can enroll in IDR and cut their monthly payments to an affordable share of their discretionary income. While the median college graduate can expect to pay around $300 per month on her loans if she stays in the standard plan, typical monthly payments in IDR are only $154.

In a new American Enterprise Institute report, Jason Delisle and I show that participation in IDR has surged over the past several years. Over 8 million borrowers are now paying back their loans through IDR. That has undoubtedly kept many people out of default. But the program has a downside: sharply escalating costs that threaten the long-term fiscal stability of the student loan system. According to Education Department documents obtained by the Wall Street Journal, taxpayer losses on federal student loans may exceed $400 billion.

Two features of the student loan system conspire to produce this toxic outcome. First, graduate students can borrow unlimited amounts from the federal government. Second, most borrowers enrolled in IDR have their debts fully discharged after 20 years. Over half the loans in IDR belong to just 17% of borrowers, who owe more than $100,000 each. Much of that debt will eventually be forgiven.

Lower-income borrowers aren’t the problem: most of them owe small amounts and have no graduate school debt. Policymakers should tackle the excessive subsidies going to high-balance borrowers to ensure that IDR remains an option for those who are truly struggling to make their loan payments. To that end, Congress should implement commonsense caps on federal lending to graduate students and pare back IDR’s loan forgiveness benefits for borrowers with high balances. Preserve the student loan safety net, but make sure it is helping the right people.