Home > Uncategorized > NYTimes Article Headline SHOULD Read “Data Gathering on Student Loan Defaults Favors Bankers and Profiteers”

NYTimes Article Headline SHOULD Read “Data Gathering on Student Loan Defaults Favors Bankers and Profiteers”

August 26, 2018

Today’s NYTimes features an op ed article by Ben Miller, the senior director for postsecondary education at the Center for American Progress. titled “The Student Debt Problem is Worse Than We Imagined“. After reading the article, though, I think a more appropriate title would be “Data Gathering on Student Loan Defaults Favors Bankers and Profiteers”.

As Mr. Miller explains in the article, by statute the current default rates for students are based on the first three years, and that leads to some misleading data:

At that time (i.e. after three years), about one-quarter of the cohort — or nearly 1.3 million borrowers — were not in default, but were either severely delinquent or not paying their loans. Two years later, many of these borrowers were either still not paying or had defaulted. Nearly 280,000 borrowers defaulted between years three and five.

Federal laws attempting to keep schools accountable are not doing enough to stop loan problems. The law requires that all colleges participating in the student loan program keep their share of borrowers who default below 30 percent for three consecutive years or 40 percent in any single year. We can consider anything above 30 percent to be a “high” default rate. That’s a low bar.

Among the group who started repaying in 2012, just 93 of their colleges had high default rates after three years and 15 were at immediate risk of losing access to aid. Two years later, after the Department of Education stopped tracking results, 636 schools had high default rates.

Mr. Miller reports we are now at a point where “…these borrowers owed over $23 billion, including more than $9 billion in default.” And which colleges have failed to get over the low bar set for defaults?

For-profit institutions have particularly awful results. Five years into repayment, 44 percent of borrowers at these schools faced some type of loan distress, including 25 percent who defaulted. Most students who defaulted between three and five years in repayment attended a for-profit college.

The secret to avoiding accountability? Colleges are aggressively pushing borrowers to use repayment options known as deferments or forbearances that allow borrowers to stop their payments without going into delinquency or defaulting. Nearly 20 percent of borrowers at schools that had high default rates at year five but not at year three used one of these payment-pausing options.

But here are three points what Mr. Miller’s article DOESN’T make:

  1. Based on the recent history of the mortgage collapse, should the student loan debt be uncollectible the BANKS will not be vulnerable, TAXPAYERS will be!
  2. We now have a Secretary of Education who wants to DEREGULATE the for-profit schools, making it possible for them expand their misleading advertising which will expand their student bodies and income without any oversight.
  3. When the bubble inevitably bursts, the profiteers who underwrite these for-profit institutions will keep the money they’ve “earned”.

I suggest the NYTimes redo their headline so that readers who skim the newspaper get a quick understanding of what is really going on.

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