Student loan default rates worse than reported
- New data about the student debt crisis indicates the situation is worse than commonly reported, according to Ben Miller, senior director for postsecondary education at the Center for American Progress (CAP), in a commentary in The New York Times.
- Referencing data on student loan repayment from 5,000 U.S. institutions obtained from the Ed Department via a Freedom of Information Act request, Miller said the federal government's focus on a three-year window for monitoring default rates is too narrow. He found that rates continued to climb in the years after while deferments declined.
- For example, of colleges that had graduates begin repayment in 2012, 93 institutions had high default rates three years later — but that number swelled to 636 institutions two years after, during which time the Ed Department was no longer monitoring results. The default problem is much worse with for-profit colleges, Miller wrote. At the five-year point in repayment, 44% of for-profit borrowers faced loan distress, including 25% who defaulted.
The student debt issue has prompted discussion about higher education accountability, but some experts say it must include a specific examination of the circumstances of the student and the institution. Miller said in his commentary that the data show federal and state governments, along with higher education, must make college more affordable, especially for low-income students.
Yet the value of a college education has been increasingly debated, with some critics suggesting that while higher education is addressing access and retention, it must now also consider student outcomes in the workforce. That could lead institutions to place more focus on practical career skills that provide pathways to better-paying jobs.
Meanwhile, the federal government's top official overseeing the student loan market through the Consumer Financial Protection Bureau resigned Monday. In his resignation letter to CFPB acting director Mick Mulvaney, Seth Frotman, student loan ombudsman, said the agency under President Donald Trump has acted to "serve the wishes of the most powerful financial companies in America."
He added that Mulvaney was hampering the efforts of his office and withholding damaging data about lenders. Since its inception, the student loan office has returned some $750 million to student borrowers who it determined were treated unfairly by lenders, according to the Associated Press.
The CFPB has been involved in lawsuits against for-profit colleges and Navient, one of the nation's largest student lenders. But critics say the Ed Department, headed by Betsy DeVos, has been unwilling to help the CFPB with the lawsuits. DeVos has moved to weaken or reverse a number of Obama-era education polices, including releasing proposed regulations that make it harder for borrowers to make a complaint or seek relief from their debt.
- The New York Times The student debt problem is worse than we imagined