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Offline Ashvin

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Having exactly WHAT to do with the discussion? Holy Non-Sequitur, Batman!


It has everything to do with radical leftists like you ignoring all the data, facts, arguments posted here about student loans and just screaming bloody murder whenever any aspect of the welfare state is challenged. Respect for personal contractual obligations is anathema to your virtue signaling about "compassion" for the poor student loan debtors.

This is not a discussion - it's your endless drooling of anti-conservative ideological platitudes. We probably agree on a fair amount about student loan debt relief but you're so caught up in the leftist echo chamber that you refuse to listen to anything which comes from outside of it.

Quote
Thanks for the primer on bankruptcy. Your non-response to the obvious hypocrisy is also here to observe and admire

The Cult of the Radical Left has really done a number on you, man. I explained exactly why it is not hypocrisy - why we can have respect for contractual obligations AND debt relief mechanisms such as bankruptcy (the ancient Hebrews did this balancing quite well) - but it's as if you didn't read a single word. That's why you can't come up with any rebuttals. Maybe it's time you check into Rehab and go on a Vox Detox cleanse.
« Last Edit: May 06, 2019, 05:23:22 AM by Ashvin »

Offline RE

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It has everything to do with radical leftists like you ignoring all the data, facts, arguments posted here about student loans

I just posted up still more data re: Student Loans and who owes the majority of the debt, and it ain't poor darkies who went to Barber School.  In addition, I went through a detailed analysis of the math on this, to which the right wing of this website did not respond.  The major debt holders are, you guessed it, children of RICH PEOPLE 🤑!  lol.

Who is ignoring the facts here, hmm?  The Radical Right populating this website.

RE
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Offline Surly1

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Having exactly WHAT to do with the discussion? Holy Non-Sequitur, Batman!


It has everything to do with radical leftists like you ignoring all the data, facts, arguments posted here about student loans and just screaming bloody murder whenever any aspect of the welfare state is challenged. Respect for personal contractual obligations is anathema to your virtue signaling about "compassion" for the poor student loan debtors.

This is not a discussion - it's your endless drooling of anti-conservative ideological platitudes. We probably agree on a fair amount about student loan debt relief but you're so caught up in the leftist echo chamber that you refuse to listen to anything which comes from outside of it.

Quote
Thanks for the primer on bankruptcy. Your non-response to the obvious hypocrisy is also here to observe and admire

The Cult of the Radical Left has really done a number on you, man. I explained exactly why it is not hypocrisy - why we can have respect for contractual obligations AND debt relief mechanisms such as bankruptcy (the ancient Hebrews did this balancing quite well) - but it's as if you didn't read a single word. That's why you can't come up with any rebuttals. Maybe it's time you check into Rehab and go on a Vox Detox cleanse.

I read everything you post here; I simply reject your analysis where it takes leave of the facts. Where I refute, or call into question your boundless hypocrisy, you ignore.

Which I will now do with you, for the benefit of others on this Forum. With a reminder that the stink of Trumpism will NEVER wash off.

As vis a vis the ancient Hebrews and their relation to debt burdens, I ardently await the Day of Jubilee.
"It is difficult to write a paradiso when all the superficial indications are that you ought to write an apocalypse." -Ezra Pound

Offline RE

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🎓 Student Loan Debt Statistics In 2018: A $1.5 Trillion Crisis
« Reply #123 on: May 06, 2019, 10:53:42 AM »
Found the stats in question!  :icon_sunny:  From Forbes, bastion of Capitalista financial reporting.

Look at the distribution of debt by amount owed table and multiply out.  You can see where the majority of the debt lies.

RE

https://www.forbes.com/sites/zackfriedman/2018/06/13/student-loan-debt-statistics-2018/#287cf9867310

Student Loan Debt Statistics In 2018: A $1.5 Trillion Crisis

 

Student Loan Debt Statistics In 2018: A $1.5 Trillion Crisis

Zack Friedman
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Student loan debt is now the second highest consumer debt category - behind only mortgage debt - and higher than both credit cards and auto loans.

According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. The average student in the Class of 2016 has $37,172 in student loan debt.

The latest student loan debt statistics for 2018 show how serious the student loan debt crisis has become - for borrowers across all demographics and age groups.

If you are a student loan borrower, the following student loan debt statistics can help you make more informed decisions regarding student loan refinance, student loan consolidation, student loan repayment and student loan forgiveness.

Student Loan Statistics: Overview

Total Student Loan Debt: $1.52 trillion

 

Total U.S. Borrowers With Student Loan Debt: 44.2 million

Student Loan Delinquency Or Default Rate: 10.7% (90+ days delinquent)

Total Increase In Student Loan Debt In Most Recent Quarter: $29 billion

New Delinquent Balances (30+ days): $32.6 billion

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New Delinquent Balances - Seriously Delinquent (90+ days): $31 billion

(Source: As of 1Q 2018, Federal Reserve & New York Federal Reserve)


States With The Most Student Loan Debt

Not surprisingly, states with larger populations have higher aggregate student loan debt. California, Florida, Texas and New York are among the four highest states for total student loan debt outstanding among resident borrowers.

California, Florida, Texas and New York represent more than 20% of all U.S. student loan borrowers.

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Source: Enterprise Data Warehouse
High Student Loan Debt States & Low Student Loan Debt States

New Hampshire has the highest average student loan debt per student ($36,367) from the Class of 2016.

Utah has the lowest average student loan debt per student ($19,975) from the Class of 2016.

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The Institute For College Access & Success
Student Loan Debt Per Capita In Select U.S. States

In the U.S., as of 2016, the average student loan debt per capita is $4,920. Pennsylvania, New York and Michigan have among the highest student loan debt per capita in the nation.

Arizona: $4,760

California: $4,160

Florida: $4,480

Michigan: $5,330

New York: $5,570

Ohio: $5,700

Pennsylvania: $5,690

Texas: $4,510

Distribution Of Student Loan Borrowers By Balance

As of 2018, more than 42 million student loan borrowers have student loan debt of $100,000 or less.

More than 2 million student loan borrowers have student loan debt greater than $100,000, with 415,000 of that total holding student loan debt greater than $200,000.

The largest concentration of student loan debt is $10,000 - $25,000, which accounts for 12.4 million student loan borrowers.

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New York Federal Reserve
Total Student Loan Balances By Age Group

Over the past five years, student loan debt balances have grown across each age category.

On a percentage basis, the largest increase in student loan debt has come from a surprising age group: 60 to 69-year-olds, who have experienced an 71.5% increase in student loan debt. However, on a dollar basis, this age group represents a $35.6 billion increase over the same period, which is the lowest increase among all age groups.

On a dollar basis, the highest increase in student loan debt is among 30 to 39-year-olds, who as a group now hold over $461 billion in student loans. On a percentage basis, the amount of student loan debt held by 30-39 year-olds has increased 30.2% over the past five years.

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Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
Number Of Student Loan Borrowers By Age Group

The largest concentration of student loan borrowers is under 30-years-old, followed by the 30-39 age group.

Therefore, there are 29.1 million student loan borrowers under the age of 39, with this group representing approximately 65% of all student loan borrowers.

As of 2017, here is the breakdown of student loan borrowers by age.

< 30-years-old: 16.8 million

30-39: 12.3 million

40-49: 7.3 million

50-59: 5.2 million

60+: 3.2 million

Student Loan Debt Outstanding By Student Loan Program

Over 33 million student loan borrowers hold approximately $1.1 billion in Direct Loans. Another 14.5 million student loan borrowers hold $301 billion in Federal Family Education Loans (FFEL).

Direct Loans: $1,066.8 billion (33.3 million borrowers)

Federal Family Education Loans (FFEL): $301.1 billion (14.5 million borrowers)

Perkins Loans: $7.6 billion (2.5 million borrowers)

TOTAL: $1,375.5 billion


Student Loan Debt Outstanding By Student Loan Type

Stafford Subsidized: $272.2 billion (29.6 million borrowers)

 

Stafford Unsubsidized: $463.3 billion (28.4 million borrowers)

Stafford Combined: $735.5 billion (33.0 million unique borrowers)

Grad PLUS: $59.6 billion (1.2 million borrowers)

Parent PLUS: $83.7 billion (3.5 million borrowers)

Perkins: $7.6 billion (2.5 million borrowers)

Consolidation: $489.0 billion (12.0 million borrowers)


Student Loan Debt Statistics By Loan Status For Direct Loans

Approximately $600 billion in Direct Loans across 17.8 million student loan borrowers are in student loan repayment. Approximately 11 million student loan borrowers are in student loan deferment, student loan forbearance or student loan default.

Student Loans In School: $133.5 billion (7.4 million borrowers)

Student Loans In Repayment: $600.0 billion (17.8 million borrowers)

Student Loans In Deferment: $103.0 billion (3.3 million borrowers)

Student Loans in Forbearance: $108.3 billion borrowers (2.6 million borrowers)

Student Loans In Default: $88.4 billion (4.7 million borrowers)

Student Loans In Grace Period: $25.9 billion borrowers (1.2 million borrowers)


Student Loan Debt Statistics By Repayment Plan For Direct Loans

There are 12.8 million borrowers with $233.5 billion of student loan debt in the Level Student Loan Repayment Plan (student loan repayment in 10 years or less), which represents the largest concentration of borrowers in student loan repayment.

The second most concentrated group of borrowers is enrolled in Income-Based Repayment (IBR) at $192.0 billion and 3.6 million borrowers.

Level Repayment Plan  (< 10 years): $233.5 billion (12.8 million borrowers)

Level Repayment Plan (> 10 years): $79.1 billion (1.8 million borrowers)

Graduated Repayment Plan (< 10 years): $88.3 billion (3.3 million borrowers)

Graduated Repayment Plan (> 10 years): $14.3 billion (0.3 million borrowers)

Income-Contingent Repayment (ICR) Plan: $27.6 billion (0.6 million borrowers)

Income-Based Repayment (IBR) Plan: $192.0 billion (3.6 million borrowers)

Pay As You Earn (PAYE) Plan: $68.3 billion (1.2 million borrowers)

Revised Pay As You Earn (REPAYE) Plan: $108.8 billion (2.0 million borrowers)


Servicer Portfolio By Repayment Plan

 

As of December 31, 2017, AES/PHEAA (otherwise known as FedLoan Servicing) and Navient service the largest portfolios of student loans in repayment in the U.S. FedLoan Servicing is the largest servicer of federal direct and Federal Family Education Loans.

The most popular student loan repayment plan is the Level Repayment Plan, which means student loan repayment in less than 10 years, followed by REPAYE (Revised Pay As You Earn).

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National Student Loan Data System


Other Important Student Loan Debt Statistics

In addition, there are several other startling statistics regarding the state of student loan debt:

  • Nearly seven in 10 seniors (68%) who graduated from public and non-profit colleges in 2015 had student loan debt.
  • In 2012, 1.3 million students graduated with student loan debt.
  • In 2012, 66% graduated from public colleges, 75% graduated from private colleges and 88% graduated from for-profit colleges.
  • Almost half (47%) of private loan borrowers in 2011-12 borrowed less than they could have in federal Stafford loans for college.
  • While private loan volume peaked at $18.1 billion in 2007-2008, private loan volume is now $7.8 billion as of 2014-2015.
  • 6% of all undergraduates – 1,373,000 students – borrowed private loans in 2011-12.
  • Four out of five 2016 graduates with state loan debt attended schools in just four states: Texas, Minnesota, Massachusetts, and
    New Jersey that awarded only 14% of bachelor’s degrees.
  • Of the 100 colleges where graduates borrow most in private loans, 85 are nonprofit four-year colleges and 34 are located in Pennsylvania.
  • At public colleges, average debt in 2012 was $25,550 (25% higher than in 2008, when the average was $20,450).
  • At private nonprofit colleges, average debt in 2012 was $32,300 (15% higher than in 2008, when the average was $28,200).
  • At for-profit colleges, average debt in 2012 was $39,950 (26% higher than in 2008, when the average was $31,800).
  • About 20% of the Class of 2012's student loans were private student loans.
  • Graduates who receive Pell Grants are more likely to borrow more debt: 88% had student loans in 2012, with an average of $31,200 per borrower.
  • Graduates who did not receive Pell Grants: 53% of those who never received a Pell Grant had debt, with an average of $26,450 per borrower — $4,750 less than the average debt for Pell recipients with debt.

(Source: The Institute for College Access and Success)

Student Loan Forgiveness

Student loan forgiveness comes in several forms. Two of the most popular types of student loan forgiveness are Public Service Loan Forgiveness and Teacher Student Loan Forgiveness.

As of December 31, 2017, there are 802,040 cumulative Public Service Loan Forgiveness borrowers.

Since 2012, 1,361,184 employment certification forms have been approved and 705,362 have been denied.

(The above student loan debt statistics include data from The New York Federal Reserve Credit Panel/Equifax, The Institute For College Access and Success, National Student Loan Data System, Mark Kantrowitz, Federal Student Aid and FedLoan Servicing).

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Offline Eddie

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Re: Subprime Student Loans
« Reply #124 on: May 06, 2019, 11:19:52 AM »
So, you're deleting my posts now. Figures. This last article, once again, says nothing about defaulters. Not at all. More smoke and mirrors as far as the really important facts.

The Diner is off my list. You and Surly deserve each other, You both have lost my respect here, Don't guess that matters, I'm gone and I won't be back, Ever.

 Have fun with your cut-and paste silliness. This site is now as irrelevant to me as TBF. The flip side of the same coin.
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Offline RE

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Re: Subprime Student Loans
« Reply #125 on: May 06, 2019, 11:41:33 AM »
So, you're deleting my posts now.

You violated the CoC and called me "chief".  I already warned you on that one.  You were doing OK until then.

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Offline RE

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🎓 Student Loan Debt Statistics In 2018: Doing the Math
« Reply #126 on: May 06, 2019, 11:46:26 AM »
I did the math for you guys.   :icon_sunny:

As you can see, only around 7.8% of the total debt is held by people with under $10K in loans.  92% goes to everybody else.  Even if the low end has a higher default rate, they still would not be in the majority of total amount in default.

Amt. Owed Average Amt # Debtors Total Owed   % Total Owed
           
<5000 5 8.77 43.85   0.033722987
5K-10K 7.5 7.55 56.625   0.04354764285
10K-25K 17.5 12.37 216.475   0.1664808121
25K-50K 32.5 8.48 275.6   0.2119510882
50K-75K 62.5 3.54 221.25   0.1701530416
75K-100K 87.5 1.5 131.25   0.100938245
100K-150K 125 1.24 155   0.1192032608
150K-200K 175 0.55 96.25   0.07402137968
>200K 200 0.52 104   0.07998154272
           
    Total Debt 1300.3   1

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Offline Ashvin

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Re: 🎓 Student Loan Debt Statistics In 2018: Doing the Math
« Reply #127 on: May 06, 2019, 12:39:08 PM »
I did the math for you guys.   :icon_sunny:

As you can see, only around 7.8% of the total debt is held by people with under $10K in loans.  92% goes to everybody else.  Even if the low end has a higher default rate, they still would not be in the majority of total amount in default.


First of all, even if your simplistic breakdown is at all meaningful, which is questionable... the conclusion would be that an across the board student loan amnesty program would mostly benefit the middle to upper class cohorts who can afford to pay back some of their loans. Is that what you want?

You also never responded to my point that a "default" does not mean the total loan is in default or owed. A person with a decent income may have paid off 50% of their loan and then defaulted on a couple payments for whatever reason, and this person would make it into your stats.

This doesn't have to be a purely political issue, but of course the leftist ideologues don't know how to talk about anything without making it purely political.

Offline RE

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🎓 Student Loan Debt Statistics In 2018: Charting the Distribution
« Reply #128 on: May 06, 2019, 12:54:53 PM »
In order to better visualize the distribution, I charted it out for you guys.  :icon_sunny:

     
Student Debt Distribution by Amount Owed
           
                   
300                  
290                  
280                  
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20                  
10                  
  <5K 5K-10K 10K-25K 25K-50K 50K-75K 75K-100K 100K-150K 150K-200K >200K

RE
« Last Edit: May 06, 2019, 01:01:08 PM by RE »
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Offline RE

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Re: 🎓 Student Loan Debt Statistics In 2018: Doing the Math
« Reply #129 on: May 06, 2019, 12:57:49 PM »
the conclusion would be that an across the board student loan amnesty program would mostly benefit the middle to upper class cohorts who can afford to pay back some of their loans.

Of course.  That's why the demonstrations are packed with middle to upper class white kids, not poor black kids.  ::)

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Offline RE

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Here's a few more FACTS for you on Student Loan Borrowers at the high end from Professional Schools:

(No items to show)
...and below an article about how Non-Profit Universities cost the taxpayer more than For-Profit schools.

This is of course all "Leftist Spin" and "simplistic" analysis.  ::)  Besides that, if I do this, I am a "copy/paste" artist, if a Righty does it, he is doing "research"::) ::)

RE

https://www.studentloanplanner.com/not-profit-universities-biggest-culprit-student-loan-crisis/

Not for Profit Universities: The Biggest Culprit of the Student Loan Crisis

Not for Profit Universities: The Biggest Culprit of the Student Loan Crisis

\"Avatar\"

By Travis Hornsby - Updated September 12, 2018 Leave a Comment

Very few lawmakers, reporters, or thought leaders understand how badly many professional and grad schools at not for profit universities are screwing their students and the taxpayer. All the attention is on greedy for-profit schools who sign someone up for a useless degree often leaving them with $5,000 to $20,000 of debt.

The data on professional schools is so distorted, it would cause many of them to close if the public knew how out of control costs have become. Whether by luck or design, almost no one knows how awful the tuition problem is after undergrad thanks to shoddy government stats that shield the student loan crisis.

The Student Loan Default Rate Gets All the Public Attention

Look at this chart from the College Board’s student loan statistics. It shows default rates for the cohort of students who entered repayment starting in 2008-2009. Notice that 47% of students from for-profit colleges defaulted on their student loans.

By contrast, only 5% of grad school borrowers defaulted.

\"Not

* Data from the College Board

You could look at this one piece of information as a lawmaker and determine that for-profit colleges are the primary bane of education in America today and should be cut off from federal student loans.

I agree that for-profit schools have no business receiving federal student aid. However, charts like these are extremely deceiving as it pertains to the student loan default crisis.

Looking at this, one would also conclude that grad school borrowers are doing great and that advanced education is clearly a great investment.

Looking at the College Scorecard Shows More Great News For Prestigious Schools Student Loan Repayment

\"Student

I went to the website for the federal College Scorecard, which shows a bunch of data at the institutional level for student loan repayment.

Keep in mind, this is the same site that grossly exaggerated the rate at which undergrads pay down at least $1 of what they borrowed (principal not just the interest). For example, before they discovered the coding error, the site said that 77% of non-profit private college grads paid down some of their student loan debt within three years.

After they fixed the error, the real rate dropped to 59% of undergrads, which is a big difference.

Hence, any data on the site now is more accurate. Check out the College Scorecard’s data showing the percent of University of Pennsylvania grads who pay down at least $1 of principal in their first three years after graduation.

\"Student

Eighty-four percent of undergrads pay off some of their debt at UPenn within three years. That’s fantastic right?

If you look at other elite institutions, repayment rates are high across the board. Notice how much higher the repayment rate is compared to other institutions, which is at a pitiful 47%.

How to Hide Abuse of Federal Student Loan Dollars in Faulty Government Statistics

If you look at all the student loan stats in the media, all of them reflect things like student loan default rates. Occasionally they’ll talk about forbearance, and sometimes they even chat about the rising number of borrowers who will receive PSLF.

What I never see are stats surrounding how many borrowers at professional and graduate school programs pay down at least $1 of the principal within three to five years.

Undergrad programs have to report this, and the data is very transparent and open to the public, even though that data was crap until recently.

Think about an institution like UPenn (which I have nothing against by the way, I only chose them because my wife trained there and one of my first clients was a Penn veterinarian). Penn’s undergrad default rate is very low.

Their professional schools like their College of Veterinary Medicine have extremely low default rates. However, it costs over $350,000 to become a Penn veterinarian. Unless you’re rich, you’re borrowing all of that.

The average salary of a typical vet might be $80,000. It’s obvious that there’s zero chance a person making $80,000 can afford to pay off $300,000. They’d have to pay $40,000 for 10 years just to pay everything off.

Hence, the default rate and the forbearance rate are very low for Penn’s professional school programs. However, the percent of students who actually pay down their debt within 3 years is likely worse than even the sketchiest for-profit schools.

How Many Professional School Graduates Actually Pay Off Their Debt?

\"Projections

The answer is quite a few. From all the mailers you receive asking you to refinance your student loans, you know that a lot of people pay off their student loans in full.

That said, the most expensive private and public universities help their students rack up so much debt that they have no chance of paying it back.

Look at the distribution of debt in the US below. This only includes the approximately $1 trillion federal student loan portfolio.

\"Student

It’s stunning that 8% of borrowers account for 38% of the debt. That makes sense in that you’d expect individuals borrowing for med school or law school to owe multiples of what someone just graduating undergrad would have.

However, at the very high end according to the Department of Education, 500,000 borrowers out of more than 35 million in the Direct Loan program owe 13% of the debt.

The vast majority of these borrowers in the 80k+ club are grad or professional school degree holders. You can know this because students can only borrow a low five-figure amount for undergrad studies, while you can borrow up to the cost of attendance for grad school, even if it’s $550,000 for NYU dental school.

For-Profit Schools Are a Big Problem, But Not for Profit Universities Hurt the Taxpayer More

I don’t want to say that for-profit schools that provide a useless or low-value product don’t deserve attention. I believe it’s quite unfortunate that Secretary Devos recently shuttered the for-profit unit at the Dept of Education.

The problem is when a borrower who goes to barber school and defaults on his $10,000 student loans, the impact to the federal budget is limited.

I’d argue that the individual faces significantly more serious repercussions than the taxpayer. Imagine you defaulted on a small debt amount but could barely afford your electric bill. You believed this scam operation that told you they could teach you how to earn $14 an hour instead of $10. You lack good info on income-based repayment, so you default.

Now your credit score is wrecked. Your car loan costs more, your credit cards charge even more interest, and good luck qualifying for a home.

Contrast that to the dentist with $500,000 of student debt. She will never be able to afford to pay that back. While she performs a vital service to society as a dentist, the market says her skill is worth something between $120,000 to $200,000 a year.

After taxes, she cannot pay the government back. However, she will enter income-driven repayment and perhaps hire someone like me to mitigate the cost of her debt through smart student loan planning strategies.

The $500,000 dentist is equal to 50 students who got suckered by for-profit colleges.

Unfortunately, professional schools do not have to report the percent of students paying at least $1 toward their debt three years after graduation like undergrad programs do. Most for-profit schools offer primarily undergrad degrees, so they all show up in the stats.

Who’s the bigger problem for the future solvency of our country, for-profit schools or not for profit universities that decided to jack up their tuition for professional programs? Sadly, lawmakers don’t even have the data to make this decision.

You can’t control the actions of lawmakers or statistics and projections for student loan defaults. What you can do is control your own student loan debt repayment plan. Not quite sure where to start? 

Student Loan Planner has done 1,000+ student loan consults for clients with $275,000,000+ of combined student debt, and we can help you figure out the best path to paying back your student loans in just 1 hour.

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Offline Ashvin

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Re: 🎓 Student Loan Debt Statistics In 2018: Doing the Math
« Reply #131 on: May 07, 2019, 02:11:46 PM »
the conclusion would be that an across the board student loan amnesty program would mostly benefit the middle to upper class cohorts who can afford to pay back some of their loans.

Of course.  That's why the demonstrations are packed with middle to upper class white kids, not poor black kids.  ::)

RE

So are you against these "liberal progressive" proposals to "cancel all student debt"? Based on your own stats and articles, you should be.

Offline RE

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Re: 🎓 Student Loan Debt Statistics In 2018: Doing the Math
« Reply #132 on: May 07, 2019, 05:58:59 PM »
the conclusion would be that an across the board student loan amnesty program would mostly benefit the middle to upper class cohorts who can afford to pay back some of their loans.

Of course.  That's why the demonstrations are packed with middle to upper class white kids, not poor black kids.  ::)

RE

So are you against these "liberal progressive" proposals to "cancel all student debt"? Based on your own stats and articles, you should be.

First off, I'm not a "liberal progressive", they're almost as annoying as conservative libertarians.  Second, I already stated what I would like to see a couple of pages back in my response to K-Dog, a post ignored by the Radical Right Representatives here.  You're not keeping up with the posting.

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🎓Who Are Student Loan Defaulters?
« Reply #133 on: May 08, 2019, 02:32:02 AM »
Today's copy/paste research data on the Student Loan problem.

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https://www.americanprogress.org/issues/education-postsecondary/reports/2017/12/14/444011/student-loan-defaulters/

Who Are Student Loan Defaulters?


Who Are Student Loan Defaulters?

College students walk between classes on their campus in New York, February 2017.
AP/Bebeto MatthewsCollege students walk between classes on their campus in New York, February 2017.

Download the PDF here.

Every year, 1 million student borrowers default on nearly $20 billion in federal loans.1 New data present the best picture ever accessible of who these borrowers are, the path they took into default, and whether or not they were able to return their accounts to good standing.2

The data show that the average defaulter looks very different from stereotypical portrait of a college student as someone who comes straight to college out of high school and lives in a dormitory on campus while pursuing a bachelor’s degree. Defaulters are more likely to be older, be Pell Grant recipients, and come from underrepresented backgrounds than those who never default. The median defaulter takes out slightly over $9,600—just more than one-half of what the median nondefaulter borrows.3 Three out of every 10 defaulters are African American and nearly one-half of all defaulters never finish college.

By and large, defaulters do not follow a straight line from entering repayment to defaulting at the earliest possible moment, after 270 days of delinquency. Instead, data show that defaulters take advantage of opportunities to pause payments without going delinquent. The median borrower took 2.75 years to default after entering repayment.4

Sadly, once borrowers defaulted, many had trouble getting out. Forty-five percent of defaulters have not found a solution to return their most recent default back to good standing. Of the 55 percent of defaulters who resolved their most recently defaulted loans, almost one-half did so by paying off the debt—a solution that could require them to pay large amounts in collection costs. These figures also do not reflect the fact that each year nearly 100,000 borrowers default on their loans for a second time.5

Unacceptable default rates have equity and accountability implications as well. Repayment solutions fail the nearly one-half of African American borrowers who default on their loans.6 Although the federal government measures and enforces sanctions on colleges with high default rates, the accountability measure fails to track almost one-half of all defaults, which explains why only 10 institutions are at risk of losing access to federal aid this year.7

Federal policy cannot allow this default situation to persist. To be fair, it is possible that future numbers could look better as more borrowers take advantage of income-driven repayment (IDR) plans. These plans tie monthly payments to a set share of a borrower’s income, which in turn makes loan payments more affordable. However, there is minimal public information available on the characteristics of borrowers using these options. The effect of reforming repayment on the path out of default is also unclear. The U.S. Department of Education should conduct more analyses to assess how well these income-based payment plans address the national default problem and to determine if there are certain types of borrowers who need repayment assistance beyond these plans.

Furthermore, the conversation around student loan defaults must include the role that institutions play. Federal repayment options can only be effective if students leave school having acquired insufficient skills and knowledge or if they drop out after a short time. Changes to federal accountability systems—such as the creation of a risk-sharing system that requires institutions to cover a portion of costs when student loans go bad—may provide new incentives needed to encourage institutions to better focus on preventing the educational conditions that later lead to default.8

Background on student loan default

A federal student loan enters default when a borrower fails to make a payment on it for 270 consecutive days.9 When this happens, the borrower’s loan is transferred from the student loan servicer—a private contractor responsible for collecting payments on behalf of the federal government—to the Debt Management Collections System.10 Borrowers then have 60 days to come to a repayment arrangement with the Education Department. If no agreement is reached, the loan is transferred to a student loan debt collector.

Borrowers can face several consequences for entering default. First, defaults are recorded on borrowers’ credit reports, lowering their credit scores and potentially making it harder for them to obtain future loans, apartments, or even jobs.11 Second, defaulters can have their wages garnished or tax refunds seized, and older defaulters may lose a portion of their Social Security payments.12 Default also prevents borrowers from receiving any additional federal student aid until their loans return to good standing, making it more challenging for dropouts to return to school. Lastly, defaulters are legally required to pay for the costs of debt collection—which can be as high as 25 percent of their defaulted loan balance—to get rid of their debt.

The federal government offers borrowers two options to return a defaulted loan to good standing without having to pay off the balance. Borrowers may rehabilitate their loans—a process in which they make nine consecutive on-time payments of an agreed-upon amount. After that, the loan returns to good standing and the history of default is removed from their credit report. The record of delinquency, however, remains.13 Loans may only be rehabilitated once. Alternatively, defaulters can consolidate their loans to leave default. To do so, they must either make three on-time payments or agree to a payment plan in which their monthly bill is tied to their income.14 Consolidated loans can return to good standing, but borrowers’ credit report history does not get erased. Borrowers can consolidate a single loan one time, unless subsequent consolidations involve at least one loan that was not already consolidated out of default.

Current data on student loan defaulters is insufficient

Today, approximately 8 million Americans are in default on more than $178 billion in student loans.15 These borrowers can have their wages garnished, tax returns taken, and even lose parts of their Social Security benefits.16 Until recently, the department had not released sufficient data on who defaults on federal loans. The Education Department only produces one institution-level report on defaults—a measure of how many borrowers defaulted within three years of entering repayment.17 Those data lack basic information about the amount of debt held by defaulters.18 To the department’s credit, it has released significantly more data on loan outcomes by school through the College Scorecard, though none of these figures include specific information on default.19 All other data on default are reported for the entire portfolio or as sector-level budget projections.

In early October 2017, the Education Department’s statistical arm released data on repayment outcomes within 12 years of entering higher education for students who started in the 2003-04 academic year.20 By combining student surveys and administrative data from transcripts, financial aid databases, and other sources, these data allow for the most robust analysis of loan default to date. They make possible three types of analyses: demographic breakdowns of defaulters; longitudinal tracking of how long it took borrowers to default; and what happened after defaulting.

The nation’s current system of higher education puts the most vulnerable students at the greatest risk of default.

These recently released data, as well as other, more comprehensive data on default and loan repayment, can assist policy efforts to lower persistently high default rates. For instance, IDR plans—which take the sting out of monthly payments by tying what a student pays to their income—have been hailed as the answer to student loan default. The Government Accountability Office found that not only are borrowers on IDR plans less likely to default than their peers on other repayment plans, but also that students who are most at risk of default often do not take advantage of the IDR option.21 Furthermore, only minimal data exist on the number and characteristics of defaulted borrowers who tried to use one of these repayment options. Similarly, no available data allow policymakers to evaluate the effectiveness of economic hardship deferment or voluntary forbearance—two options that allow borrowers to temporarily stop payments—or to determine if these options help individuals get back on track or are simply waypoints to default.22

While it may not be possible to eliminate every last default, seeing so many students fail to repay despite the array of repayment options and benefits suggests that policymakers could do a better job investigating what successfully keeps students in good standing on their loans. Understanding the problem is the first step.

Defaulters represent a large portion of today’s college students

Student loan defaulters largely resemble the students who occupy campuses today. Students who entered college in the 2003-04 school year, took out a federal loan, and defaulted at some point are older, lower-income, and more likely to be financially independent than both borrowers overall and those who did not default. Defaulters are also more likely to be students of color.

Table 1 presents more detailed information on the characteristics of defaulters. The right-most column shows the percentage-point difference between the share of defaulters in a demographic category versus the overall set of loan borrowers. For instance, it shows that while 19 percent of all students who took out a federal loan started at a private for-profit college, 38 percent of all defaulters began at that same type of institution—a difference of 18 percentage points.

The figures in Table 1 show the extent to which the nation’s current system of higher education puts the most vulnerable students at the greatest risk of default. For instance, nearly 90 percent of defaulters also received a Pell Grant at one point; 70 percent came from families where neither parent earned a college degree; 40 percent came from the bottom quarter of the income distribution; and 30 percent were African American.23 These groups are overrepresented among defaulters by double-digit margins. By contrast, white students make up 60 percent of federal loan borrowers, but just 44 percent of defaulters.24 Similarly, while more than one-third of borrowers received a bachelor’s degree, only 10 percent of defaulters earned this credential.25

Defaulters borrowed less than nondefaulters

Typical media narratives portray borrowers with large debts as those most likely to struggle.26 While these individuals may have trouble affording their payments, they are not at as great a risk of default as those with smaller loan balances.

Table 2 shows the median debt load for students who defaulted on their loans broken down by attainment status, the first type of institution attended, and race. In almost every case, the median loan defaulter owed thousands of dollars less than their peers who did not default. For instance, the median defaulter owed $9,625—$8,500 less than the median loan balance for a nondefaulter.

Interestingly, individuals who attained bachelor’s degrees were the only group where the median defaulter owed more than the median nondefaulter. The median defaulter who completed a bachelor’s degree owed $6,125 more than the median nondefaulter.

Defaulters are not immediate dropouts

Driven by research from the Association of Community College Trustees (ACCT) and the Obama administration’s Council of Economic Advisers, conventional wisdom in higher education policy now recognizes that dropouts are at greater risk of default than college graduates; new data confirm that finding.27 Of students who entered higher education in the 2003-04 academic year and borrowed federal loans, 49 percent of those who defaulted dropped out of college, while just 10 percent finished a bachelor’s degree. Only 5 percent of defaulters borrowed for graduate education.28

New data also shed light on how far borrowers made it into their programs. Table 3 shows the median number of postsecondary credits earned by students who defaulted across a variety of characteristics. Surprisingly, the median dropout earned 24 credits, the equivalent of two semesters at what is considered a full-time load. This is notably higher than previous default analyses. A 2015 ACCT study, for example, found that nearly 60 percent of defaulters from Iowa community colleges accumulated less than 15 credit hours.29

There may be a technical reason for this discrepancy. Methodology documentation produced by the National Center for Education Statistics (NCES) notes that 8.5 percent of the student sample did not include transcript data.30 If many of these students borrowed and dropped out without accumulating any credits, then the median figure for credits earned would decrease.

Table 4 presents data on how defaulters performed in their courses as measured by GPA on a four-point scale. Overall, defaulters tended to have lower GPAs than nondefaulters. For instance, the median dropout who defaulted had a 2.0 GPA. The median defaulters who also finished a credential had grades in the C+ or B- range, which is high enough to be considered good academic standing.

These tables show that while defaulters may not be top students, they are often capable of doing college-level work. Institutions and policymakers should reexamine the factors that cause students to drop out and determine whether the reason why a student dropped out affects their odds of defaulting. For instance, policymakers should assess how default rates compare across borrowers who drop out due to poor academic standing, versus those who drop out due to an unexpected economic shock such as a broken car or loss of child care.

Borrowers take years to default

Even after a borrower leaves school, it typically takes some time for them to default. In fact, the median defaulter took two years and nine months to default after entering repayment—significantly longer than the nine months it takes to default without a payment.31

Table 5 shows the breakdown in the number of years between when borrowers entered repayment and when they defaulted. Fifty-three percent of borrowers who defaulted did so within three years of entering repayment. Approximately one-quarter defaulted between three and five years, while another one-quarter defaulted after five years or more.

These findings have implications for accountability measures tied to student loan default rates. When these defaulters entered higher education, colleges were judged by the share of their borrowers who defaulted within two years of entering repayment.32 According to the data in Table 5, that approach failed to account for nearly two-thirds of all students who eventually defaulted. In 2008, Congress extended the default rate window to three years, though even that only captures slightly more than one-half of all defaults.33

Unfortunately, the new NCES data are not detailed enough to indicate whether defaulters made payments before defaulting. It does indicate, however, that the median defaulter used two forbearances, which could mean that they went up to two years with no payments.34

The NCES data also provide no information on the payment plans borrowers used. Since 2007, policymakers have tried to reduce defaults by creating additional plans that tie borrowers’ payments to their incomes.35 While most of these plans were likely created after many dropouts entered repayment, it would be helpful to know if and how students’ usage of different repayment plans changed over time. To enable analysis of payment plans, the NCES should include this information in future iterations of the survey.36

Only slightly more than one-half of defaulters fix their debt

The Education Department offers several options to return a defaulted loan to good standing. Borrowers can rehabilitate their loan once, meaning they can make nine agreed-upon payments over 10 months. Alternatively, they can consolidate defaulted debts into a new loan. Defaulters could also have the debt discharged for reasons such as a permanent and total disability and, in very rare cases, through bankruptcy. And, of course, if they have the means, they could pay the debt off. The goal of these options is to ensure that default is not a lifelong sentence to financial ruin.

Many defaulters fail to make use of these options to return their loans to good standing. As shown in Table 6, only 55 percent of defaulters took steps to resolve their most recent default. Of those who did resolve their most recent default, nearly one-half paid off the debt in full. This is a potentially expensive option, given that borrowers may have to pay as much as an additional 25 percent of their loan balance in collection costs.37 Meanwhile, about one-third of individuals who resolved their most recent default did so through rehabilitation, while 15 percent used consolidation. Unfortunately, it is difficult to use the data to determine whether any of the students who fixed their loans once later defaulted a second time.

Comparing loan balances owed with the means through which borrowers resolved defaulted debts partially explains the large share of borrowers paying off their loans. Borrowers who paid off defaulted loans owed under $5,000, which is less than one-half of what borrowers who rehabilitated owed and about one-third of what those who consolidated or did not resolve their default owed. Unfortunately, the data do not show whether these debts were paid off through voluntary or involuntary means. For example, borrowers could have paid off their debt by having the federal government seize enough of their tax refunds or garnish their wages over time. Borrowers could also have made payments that immediately retired the debt. Knowing more about the different ways in which loans are paid off would have policy implications and affect whether the tools currently used to collect on defaulted student loans are judged as the right ones.

Policymakers must reconsider the path before and after default

These findings show that the federal government must study the path students take into and out of default more thoroughly and comprehensively. For instance, the long lag between entering repayment and default suggests that, in some cases, deferment or forbearances may not help with long-term payment success but rather delay bad outcomes. If that is the case, policymakers must consider other interventions for delinquent and at-risk borrowers.

Similarly, policymakers must take a closer look at the effectiveness of options to get students out of default. This should start with understanding how defaulters pay off their loans. For instance, are they doing so due to the seizure of a tax refund? Are they burning through an emergency savings cushion, putting themselves at greater risk should other financial challenges arise? This has implications for considering whether a bigger push for getting students back on a regular, affordable payment schedule may be better for them. Finally, policymakers should also look at how successful rehabilitation is at preventing redefault, compared with consolidation.

Policymakers should also consider how the options to get out of default are presented to borrowers. Are student loan collection agencies effective at guiding borrowers to their best path out of default? Do the incentives for collection agencies best align with borrower success, or would those functions be better handled by loan servicers?

Conclusion

Understanding who defaults and why matters not just because of the severe consequences borrowers face when they end up in this situation, but for equity reasons as well. As the Center for American Progress found in mid-October, one-half of black or African American borrowers from the 2003-04 entering cohort defaulted on a federal loan within 12 years of starting college. Among dropouts, the rate of defaults is even higher.38

The pain that radiates out from defaults in local communities could discourage future students from ever attending college. Young people who watch parents or peers losing much-needed tax refunds from student debt or hearing that college was not for them may become skeptical of the benefits of pursing postsecondary education.

The Education Department alone cannot fix the default crisis. The quality of education offered by schools; the share of students that finish credentials; and the amount of debt they take on are also important. But that does not absolve the federal government from ensuring that federal aid programs, especially options for defaulted borrowers, serve in the interest of helping students find success in repayment.

Ben Miller is the senior director for Postsecondary Education at the Center for American Progress.

Endnotes

  1. Office of Federal Student Aid, “Default Rates,” available at [url=https://studentaid.ed.gov/sa/about/data-center/student/default]https://studentaid.ed.gov/sa/about/data-center/student/default[/url] (last accessed November 2017).
  2. Jennie H. Woo and others, “Repayment of Student Loans as of 2015 Among 1996–96 and 2003–04 First-Time Beginning Students” (Washington: National Center for Education Statistics, 2017), available at [url=https://nces.ed.gov/pubs2018/2018410.pdf]https://nces.ed.gov/pubs2018/2018410.pdf[/url].
  3. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table cdmbhmd9,” available at [url=https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhmd9]https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhmd9[/url] (last accessed November 2017).
  4. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table dbmbhkaf,” available at [url=https://nces.ed.gov/datalab/index.aspx?ps_x=dbmbhkaf]https://nces.ed.gov/datalab/index.aspx?ps_x=dbmbhkaf[/url] (last accessed November 2017). 
  5. Office of Federal Student Aid, “Default Rates.”
  6. Ben Miller, “New Federal Data Show a Student Loan Crisis for African American Borrowers,” Center for American Progress, October 16, 2017, available at [url=https://www.americanprogress.org/issues/education-postsecondary/news/2017/10/16/440711/new-federal-data-show-student-loan-crisis-african-american-borrowers/]https://www.americanprogress.org/issues/education-postsecondary/news/2017/10/16/440711/new-federal-data-show-student-loan-crisis-african-american-borrowers/[/url].
  7. Ben Miller, “Improving Federal Accountability for Higher Education” (Washington: Center for American Progress, 2017), available at [url=https://www.americanprogress.org/issues/education-postsecondary/reports/2017/10/24/440931/improving-federal-accountability-for-higher-education/]https://www.americanprogress.org/issues/education-postsecondary/reports/2017/10/24/440931/improving-federal-accountability-for-higher-education/[/url].
  8. Ben Miller and CJ Libassi, “Sharing the Risk: A Plan for Colleges to Participate in the Costs of Student Loan Failure” (Washington: Center for American Progress, 2016), available at [url=https://www.americanprogress.org/issues/education-postsecondary/reports/2016/12/19/295187/sharing-the-risk/]https://www.americanprogress.org/issues/education-postsecondary/reports/2016/12/19/295187/sharing-the-risk/[/url].
  9. Office of Federal Student Aid, “Understanding Delinquency and Default,” available at [url=https://studentaid.ed.gov/sa/repay-loans/default#default]https://studentaid.ed.gov/sa/repay-loans/default#default[/url] (last accessed November 2017).
  10. Office of Federal Student Aid, “Single Portal Entry Debt Resolution,” available at [url=https://myeddebt.ed.gov/]https://myeddebt.ed.gov/[/url] (last accessed November 2017).
  11. Gregory Go, “How Bad Credit May Kill Your Job Prospects,” U.S. News and World Report, March 23, 2016, available at [url=https://money.usnews.com/money/blogs/my-money/articles/2016-03-23/how-bad-credit-may-kill-your-job-prospects]https://money.usnews.com/money/blogs/my-money/articles/2016-03-23/how-bad-credit-may-kill-your-job-prospects[/url]; Claire Tsosie, “What Landlords Really Look for in a Credit Check,” Nerdwallet, July 15, 2015, available at [url=https://www.nerdwallet.com/blog/finance/landlords-credit-check/]https://www.nerdwallet.com/blog/finance/landlords-credit-check/[/url].
  12. Office of Federal Student Aid, “Understanding Delinquency and Default.”
  13. Office of Federal Student Aid, “Getting Out of Default,” available at [url=https://studentaid.ed.gov/sa/repay-loans/default/get-out]https://studentaid.ed.gov/sa/repay-loans/default/get-out[/url] (last accessed November 2017).
  14. Ibid.
  15. Office of Federal Student Aid, “Federal Student Loan Portfolio,” available at [url=https://studentaid.ed.gov/sa/about/data-center/student/portfolio]https://studentaid.ed.gov/sa/about/data-center/student/portfolio[/url] (last accessed November 2017).
  16. Office of Federal Student Aid, “Understanding Delinquency and Default.”
  17. Office of Federal Student Aid, “Official Cohort Default Rates for Schools,” available at [url=https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html]https://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html[/url] (last accessed November 2017).
  18. Federal Student Aid Administration, “Default Rates.”
  19. U.S. Department of Education College Scorecard, “Find Schools,” available at [url=https://collegescorecard.ed.gov/]https://collegescorecard.ed.gov/[/url] (last accessed November 2017).
  20. Woo and others, “Repayment of Student Loans as of 2015 Among 1996–96 and 2003–04 First-Time Beginning Students.”
  21. U.S. Government Accountability Office, “Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and Forgiveness Options” (2015), available at [url=https://www.gao.gov/assets/680/672136.pdf]https://www.gao.gov/assets/680/672136.pdf[/url].
  22. Office of Federal Student Aid, “Deferment and Forbearance,” available at [url=https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance]https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance[/url] (last accessed December 2017).
  23. This issue brief uses the term African American to refer to students who are categorized by the National Center for Education Statistics as either black of African American.
  24. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table cdmbhm72,” available at [url=https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhm72]https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhm72[/url] (last accessed November 2017). 
  25. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table cdmbhm7a,” available at [url=https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhm7a]https://nces.ed.gov/datalab/index.aspx?ps_x=cdmbhm7a[/url] (last accessed November 2017).
  26. Ruth Spencer, “What’s it like living with six figures of debt in America?”, The Guardian, April 3, 2013, available at [url=https://www.theguardian.com/money/2013/apr/03/student-debt-america-six-figures]https://www.theguardian.com/money/2013/apr/03/student-debt-america-six-figures[/url].
  27. Colleen Campbell and Nicholas Hillman, “A Closer Look at the Trillion: Borrowing, Repayment, and Default at Iowa’s Community Colleges” (Washington: Association of Community College Trustees, 2015), available at [url=https://www.acct.org/files/Publications/2015/ACCT_Borrowing-Repayment-Iowa_CCs_09-28-2015.pdf]https://www.acct.org/files/Publications/2015/ACCT_Borrowing-Repayment-Iowa_CCs_09-28-2015.pdf[/url]; Council of Economic Advisers, Investing in Higher Education: Benefits, Challenges, and the State of Student Debt (Executive Office of the President, 2016), available at [url=https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160718_cea_student_debt.pdf]https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160718_cea_student_debt.pdf[/url].
  28. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table cdmbhm7a.”
  29. Campbell and Hillman, “A Closer Look at the Trillion.”
  30. National Center for Education Statistics, 2004/09 Beginning Postsecondary Students Longitudinal Study (BPS: 04/09) (U.S. Department of Education, 2011), available at [url=https://nces.ed.gov/pubs2012/2012246.pdf]https://nces.ed.gov/pubs2012/2012246.pdf[/url].
  31. National Center for Education Statistics, “Datalab, Beginning Postsecondary Students 2004-2009, Table dbmbhkaf.”
  32. U.S. Department of Education, “First Official Three-Year Student Loan Default Rates Published,” Press release, September 28, 2012, available at [url=https://www.ed.gov/news/press-releases/first-official-three-year-student-loan-default-rates-published]https://www.ed.gov/news/press-releases/first-official-three-year-student-loan-default-rates-published[/url].
  33. Office of Federal Student Aid, “Official Cohort Default Rates for Schools.”
  34. Office of Federal Student Aid, “Deferment and Forbearance,” available at [url=https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance]https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance[/url] (last accessed November 2017).
  35. Office of Federal Student Aid, “Income-Driven Plans,” available at [url=https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven]https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven[/url] (last accessed November 2017).
  36. College Cost Reduction and Access Act, Public Law 110–84, 110th Cong., 2d sess. (September 27, 2007), available at [url=https://www.congress.gov/110/plaws/publ84/PLAW-110publ84.pdf]https://www.congress.gov/110/plaws/publ84/PLAW-110publ84.pdf[/url].
  37. Student Loan Borrower Assistance, “Fees,” available at http://www.studentloanborrowerassistance.org/collections/collection-agencies/fees/ (last accessed November 2017).
  38. Ben Miller, “New Federal Data Show a Student Loan Crisis for African American Borrowers.”
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Student Loan Forgiveness Program Offers False Hope, Rejects 99% of Applications


Yves Smith

The infamous HAMP program, which the Administration revised so many times on the fly as to give incompetent and mendacious mortgage servicers air cover for failing to modify mortgages, at least had a stealth purpose. As Treasury Secretary Timothy Geithner said to the SIGTARP’s Neil Barofsky, it was to foam the runway for banks by spreading out foreclosures over time. But that still doesn’t excuse servicers for their favorite gimmick for not bothering with HAMP applications, which was to pretend they’d never received them.

But it’s not clear what the thinking was behind the 2007 Student Loan Forgiveness Program, except to create better eyewash. The ostensible goal was to give student debt relief for borrowers who went into socially useful but not well remunerated lines of work. But not only were the eligible employers (note employers, not job types) poorly specified, other elements of the program were also drafted badly in the legislation. Throw in lousy servicers, revisions to an already confusing program, and conservative sabotage into the mix, and you’ve created conditions where many make what they think are the qualifying 120 payments, only to have their application for forgiveness nixed. Only 1% of 73,000 applicants have gotten relief.

The broad outlines of the abject failure of this scheme aren’t new but the Wall Street Journal provides a useful overview and update. The program, launched in 2007, created a series of conditions for eligibility. Per the Journal:

To qualify for forgiveness, borrowers must work for a government entity or nonprofit, hold a certain type of loan, enroll in one of several specific repayment plans and make 120 full and on-time monthly payments, or 10 years’ worth. Falling short on almost any of these requirements can mean disqualification.
"It is difficult to write a paradiso when all the superficial indications are that you ought to write an apocalypse." -Ezra Pound

 

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