Missing Data:
Focusing on the Wrong Factors
Could Contribute to Student
Loan Distress
Paul Combe and Julie Ryder Lammers
© 2014. American Student Assistance. All rights reserved.
Introduction
Current data on student debt is inadequate to address how borrowers are really faring in
repaying their loans and only highlights extreme hardship in student borrowing. To some
degree, current loan data is analogous to mortality rates. Mortality rates don’t do anything
other than give a stark number of how many people have died. What is important is to
understand why they died. What caused it? Is there something that could have been done
to prevent it? If there was earlier detection, could a cure have been found? Similarly, all the
Cohort Default Rate (percentage of borrowers who default within three years of the start
of repayment) tells us is how many people have already fallen off the cliff of default within a
narrow time frame. What is needed is more data about what caused the default, what could
be done to prevent it, could we detect the problem earlier and find a cure, and could we
prevent the problem from occurring at all. Unfortunately, all we really track is the number
of loans that have died. We could be much more successful in returning federal assets in
student lending if we did more to make sure problems didn’t occur in the first place and held
people accountable for metrics that help, rather than add to, the distress of borrowers.
You get what you measure. The federal government tracks data on student loans
with an emphasis on total indebtedness and default rates, and as a result, those
two data points are the main influencers of policy debate around student debt.
In order to change the focus of discussion and increase student success, there
must be a push to collect and publish data on the whole range of student loan
repayment statuses including delinquency, deferment, forbearance
and repayment.
Student loan repayment success and default rates are not the binary sides of a
coin. The current national two-year student loan cohort default rate (CDR) for
FY11 is 10 percent.1 As the only published data on borrower status, this would
imply that the other 90 percent of student loan borrowers are not having a
problem repaying their loans. We know this is not the case. Ninety percent
of student loan borrowers may not currently be in default, but a study by the
The three-year Cohort Default Rate for the 2010 cohort is 14.7 percent. (See U.S. Department of Education, (2013) Official FY10 Three-Year CDR. Available at: www.ifap.
ed.gov/eannouncements/attachments/2013OfficialFY103YRCDRBriefing.pdf ) The Department of Education began measuring the default cohort over a three-year period
in 2009, and will begin holding schools accountable for this new rate after the official publication of data in September 2014. Because schools are not yet sanctioned for
the three-year rate, and most data available can only be compared to the two-year rate, we will mainly make reference to the two-year rate. U.S. Department of Education.
(2013) Two Year Official Cohort Default Rates for Schools. Available at: www2.ed.gov/offices/OSFAP/defaultmanagement/cdr2yr.html
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MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
2
Institute for Higher Education Policy recently found that only 37 percent of
federal student loan borrowers were in active repayment after five years.2 The
gap between those borrowers in active repayment and those who have defaulted
would not show up in a CDR calculation, but the majority of these borrowers
may be struggling to pay, are not amortizing their loans, and the balances will
continue to grow with capitalized interest, forcing them deeper and deeper into
debt. In addition, there may be many in that 37 percent who find the process
of repaying very hard to successfully manage month to month, having a ripple
effect on other purchases and life decisions. Because of how current data is
published, there is no quantifiable information on the impact debt has on the
borrower as a consumer and the economy at large.
The U.S. Department of Education (ED) currently measures and publishes loan
information through the National Student Loan Data System3 based on loan
repayment status.4 Data show how many borrowers are currently in school, in
a grace period5, in repayment, in deferment6, in forbearance7, and in default.8
The major problem with this breakdown is that the “repayment” data include
both those actively repaying their loans and those who are delinquent9 on
their payments. The rationale for calculating loan repayment in this manner
is hard to comprehend. It is difficult to argue that someone who is 269 days
behind on payment is really “repaying” their loan. But because there is no clear
picture of how borrowers are really faring in repayment, or anything about the
relationship between forbearance, deferment and delinquency, all public policy
debates continue to revolve around the one datapoint we do know something
about—default.
2
Cunningham. A.F. & Kienzl, G.S. (2011). Delinquency: The Untold Story of Student Loan Borrowing. Washington, D.C.: Institute for Higher Education Policy.
See, Section 489 of the Higher Education Act (HEA) of 1965 as amended, P.L. 110-315. Requires the maintenance of a National Student Loan Data System (NSLDS) to ensure the
collection of accurate information on student loan indebtedness and institutional lending practices and improve loan repayment.
3
U. S. Department of Education, Office of Federal Student Aid. (2014) Federal Student Loan Portfolio; Direct Loan and Federal Family Education Loan Portfolio by Status. Available
at: studentaid.ed.gov/sites/default/files/fsawg/datacenter/library/PortfoliobyLoanStatus.xls
4
Grace period is defined as “a period of time after borrowers graduate, leave school, or drop below half-time enrollment where they are not required to make payments on certain
federal student loans…Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans have a six-month grace
period before payments are due.” Office of Federal Student Aid. Glossary. retrieved at: studentaid.ed.gov/glossary
5
Deferment is defined as: “A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue on Direct Subsidized Loans,
Subsidized Federal Stafford Loans, and Federal Perkins Loans.” Ibid.
6
Forbearance is defined as, “A period during which your monthly loan payments are temporarily suspended or reduced. …During forbearance, principal payments are postponed
but interest continues to accrue. Unpaid interest that accrues during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total
amount you owe.” Ibid.
7
Default is defined as, “failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a
payment in more than 270 days.” Ibid.
8
Delinquency is defined as, “a loan is delinquent when loan payments are not received by the due dates. A loan remains delinquent until the borrower makes up the missed
payment(s) through payment, deferment, or forbearance.” After 270 days the loan will be considered in default. U. S. Department of Education, Glossary.
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MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
3
Changing the conversation about student debt beyond just default could have
far reaching impacts on the economy. There is no doubt that the impact is
severe for the fraction of the population that experiences the financial hardship
of student loan default. However, a hidden and uncounted population, that
likely amounts to millions of borrowers, has their credit score impacted just
like defaulters after becoming delinquent. This group is also putting off major
purchases and life decisions as they struggle to make student loan payments.
The repayment problems of this population—far larger than that represented
by a default number—has a cascading impact on the ability of borrowers to fully
participate in financial activity, sending ripples through the economy each time
another borrower falls past due. How big that ripple is can only be determined by
knowing the scope of the delinquency problem.
In order to change the conversation and push for new policies that help
borrowers, there must be a better means of quantifying the student loan
problem beyond default that gives a more accurate portrayal of how borrowers
are really faring as consumers in paying back their debt. The raw number of
that 10 percent in default and in dire straits after two years is not enough to
help the other 90 percent of the population. If we ever want to get more loans in
repayment and out of delinquency and default, the federal government needs to
start reporting student loan repayments in a way that reflects not just whether
they can avoid default, but how well borrowers are eliminating their debt.
I. Data spurs policy change
The corollary to “you get what you measure” is that you can’t impact or
understand that which you don’t measure. Understanding data more clearly
is not the end all and be all to fixing a problem, but transparency in data
spurs action. Time and time again we see in all areas, from education and the
environment to public health, that data impacts how we view and deal with
complex issues. In order to change the conversation about where student loan
repayment struggles are really happening for the majority of the borrower
population, we need to shine a light on the data and expose the problem for all
to see.
A perfect blueprint for managing public support around data issues can be
seen if we look outside the education field at the push to reduce fatalities due
to smoking. In 1964, the Surgeon General of the United States released the first
report on the health impacts of smoking on “firsthand” smokers.10 As a result,
U.S. Department of Health, Education and Welfare. (1964). Smoking and Health: Report of the Advisory Committee to the Surgeon General of
the Public Health Service, Available at: http://profiles.nlm.nih.gov/ps/access/NNBBMQ.pdf
10
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
4
smokers began to understand the consequences of inhaled tobacco and for
the next several decades smoking-related deaths gradually decreased.11 That
data alone was not enough, though, to impact major health or public policy
change. The initial smoking data spurred more of a cautionary tale—if YOU
choose to smoke there are negative consequences to your actions. Focusing
only on smokers didn’t bring the needed behavior modifications by the public,
so health experts pushed for more data on the impact smoke has on those
who have not made the choice to smoke but are nonetheless exposed to it. In
1986, the Surgeon General released information on the effects of secondhand
smoke on public health.12 It was not until the data about the indirect impacts
of smoking on the public at-large was disseminated that public opinion, public
policy, and public behavior began to change.13 Over the next decade the way
people talked about smoking changed, more pressure mounted on smokers
to quit, and the once widely accepted habit became a public taboo. There had
been tools to address the firsthand smoking problem before these data were
released, but understanding the broader implications had a profound impact on
the original goal of curbing smoking. Simply altering the data tracked, published,
and talked about changed both public behavior and public policy around the
issue. That change is needed again, this time in the student loan industry.
Student loan delinquency is the new “secondhand” smoke—far more people are
being impacted throughout the economy than just those who have the personal
financial burden of student debt.
Student loan data has, for a number of reasons, focused on the stark population
of defaulters with the perception that they only hurt “themselves,” but in reality
a much larger population of struggling borrowers languishes in the shadows
without assistance. Student debt struggles limit these borrowers’ ability to buy
the homes, cars and consumer goods that drive the U.S. economy, with ripple
“secondhand” effects on us all. We need to change the data tracked, published
and talked about in student lending so that we can change the public policy
debate around student loan debt and its broader impact.
Creation of the cohort default rate was itself an example of how tracking data
in a new way can force policy change. The late 1970s and early 1980s were
plagued by growing inflation, unemployment and economic instability, which,
U.S. Department of Health, Education and Welfare. (1972). The Health Consequences of Smoking: A Report of the Surgeon General.
Available at: http://profiles.nlm.nih.gov/ps/access/NNBBPM.pdf
11
U.S. Department of Health and Human Services. (1986). The Health Consequences of Involuntary Smoking: A Report of the Surgeon
General. Available at: http://profiles.nlm.nih.gov/ps/access/NNBCPM.pdf
12
Pirkle, J.; Bernert, J; Caudill, S; Sosnoff, C & Pechacek, T. (2006). Trends in the Exposure of Nonsmokers in the U.S. Population to
Secondhand Smoke: 1988–2002. Environmental Health Perspectives, 114(6): 853–858. Available at: www.ncbi.nlm.nih.gov/pmc/articles/
PMC1480505/?tool=pmcentrez#b10-ehp0114-000853.
13
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
5
coupled with poor consumer information about the nature of the loan, led many
to not meet their federal student loan obligations. The media pushed stories of
graduates walking away from student debt just days after graduating, lenders
began complaining about rising default numbers, and members of Congress
grew concerned that rising default rates would force the student loan system
they had established to the point of collapse.14 Congress reacted by holding
borrowers more accountable for debts by eliminating the ability of borrowers
to discharge their loans through bankruptcy, thus making loans a lifelong
obligation for borrowers.15 The Department of Education also felt it necessary
to react to mounting political pressure and in November 1987, Secretary of
Education William Bennett announced sweeping accountability measures for
the guaranteed student loan program. To curb defaults, ED would implement a
rule to “bar institutions from participation in all federal student aid programs if
they fail to bring the guaranteed student loan default rate of their students below
20%.” 16 The rule established that institutions would be judged based on the
number of defaults that occurred over a set time or “cohort” period. The release
of this data from ED, which for the first time outlined the scope of the student
loan default problem, launched a massive public debate about the effectiveness
of the student lending program, and how best to manage the default picture that
was now coming more clearly into focus.
The Bennett proposal as originally outlined was never put into effect, but the
following year, Congress included Senator Claiborne Pell’s Student Loan Default
Prevention Act17 as part of the Omnibus Budget Reconciliation Act of 1990.18 This
bill aimed to “reduce the cost of the FFEL program by promptly eliminating from
the program schools whose students had chronically high default rates.” 19 The
legislation required that student loan data be collected in a uniform way and
be used to hold schools and other parties like servicers and guaranty agencies
U.S, In Bid for Repayment of Student Loans, Sues 25. Arnold Lubasch, The New York Times, Jan. 29, 1985; U.S. to Pursue Physicians who Defaulted on Loans.
UPI, The New York Times, Dec. 28, 1981.; Many Doctors Failing to Pay Student Loans, UPI, The New York Times, December 7,1981; Ex-Ohio Students Say They
Can’t Pay off their Defaulted Federal Loans, Iver Peterson, The New York Times, Mar 8, 1981.
14
Higher Education Amendments Act of 1976, Pub. L. 94-482, 90 Stat. 2081, 2141 (borrowers had to wait five years before filing for bankruptcy); Higher
Education Amendments Act of 1998, Pub. L. 105-244(borrowers could not discharge loans in bankruptcy)
15
U. S. Department of Education, (1987) Press Conference on Student Loan Defaults, Secretary of Education William Bennett, Nov. 4, 1987. Available at: http://
www.c-span.org/video/?871-1/student-loan-default
16
Stafford Student Loan Default Prevention and Management Act of 1989; also known as the Student Loan Default Act of 1990. S. 568, 101st Congress, Senator
Claiborne Pell. http://beta.congress.gov/bill/101st-congress/senate-bill/568?q=%7B%22search%22%3A%5B%22Student+Loan+Default+Prevention+Initiative+
Act+of+1989%22%5D%7D
17
18
Omnibus Budget Reconciliation Act of 1990, P.L. 101-508, enacted November 5, 1990.
19
Atlanta Col. of Med. & Dental Career Inc v. W. Riley, 987 F2d 821 (D.D.C 1992)
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
6
accountable for growing defaults.20 Until this point, there had been no complete
data on loan repayment and the scope of the problem was mainly anecdotal. In
fact, when Bennett made initial statements about this proposal, he made it clear
that all the data he had were only estimates of the default problem.21
The major impetus for taking action in 1990 was a reaction to mounting public
pressure to curb the problems on which default data had shed light. The
accountability measures made data publically available for all to see, comment
on, and legislate. Without the data regarding defaults, there would not have
been the same media push or public demand for subsequent political change
to establish standards for default. Entities involved in the student loan program
could no longer hide their default rates and the increased transparency about
what was really going on spurred public outcry and political action aimed mainly
at bad schools and bad borrowers. “Good” borrowers and schools—those who
have not defaulted or have low default rates - were not part of the dialogue.
Even after 25 years of tracking, when it comes to student loan data we are really
only in the first stages of exposing the baseline problem. Like firsthand smoking,
we know the dire consequences of an individual defaulting on a student loan
but don’t yet have the data to understand the broader impact of student debt
on all borrowers’ financial decisions and actions. Data needs to articulate the
secondhand smoking effect of student loans—both that more people are being
impacted than just those in the default number, and that this larger number of
impacted people has ramifications for the economy.
II. The impact of student debt is greater than just the
default number
The CDR establishes a starting point to begin understanding default, but masks
where the majority of borrowers actually are in the repayment process. This
leads to the false assumption that all other borrowers are successfully repaying
their debts and means that we are not focusing on the solutions to the problem
that could be possible with better data. The reality is that we simply don’t have
enough data on the other 90 percent to fill in all the missing pieces and decipher
where and when borrowers are having repayment problems. This is mainly due
to the fact that calculations of cohort default are for only a narrow time frame,
Pell’s bill “requires those guaranty agencies, lenders, and institutions with default rates in excess of 25 percent to develop and carry out default management
plans. Subjects guaranty agencies, lenders, and institutions with high volume default rates in the highest five percent by volume of defaulted student loans
to program reviews by the Secretary (in the case of guaranty agencies) or by the State guaranty agency (in the case of lenders or institutions). Directs the
Secretary (or the State guaranty agency, as the case may be) to develop and implement a default management plan for such guaranty agencies, lenders, or
institutions if it is determined that their management practices substantially contribute to the high volume default.” (S. 568, 101st Congress).
20
21
Press Conference on Student Loan Defaults by Secretary of Education William Bennett, November 4, 1987 (1987)
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
7
the means of pinpointing a solid number of those in delinquency are varied, and
the definition used for who falls into repayment are inconsistent.
Problems with the CDR as a measure of default have been widely debated.22
The Government Accounting Office (GAO) has pointed out that while the “cohort
default rates provide the information required under the HEA, they do not appear
to provide decision-makers with sufficient information on defaults in the Title IV
loan programs.”23 Issues with the timeframe used to evaluate borrowers,24 the
types of loans included in the calculation (or more importantly excluded from
the calculation25), and questions about how suspended payments should be
considered,26 mean that the CDR is not a good gauge to understand how many
borrowers are negatively impacted by the funding they obtained to access their
education. For example, data compiled by the Institute for Higher Education
Policy (IHEP) provides a telling example of how much is being missed by the CDR
calculation based on the limited timeframes the CDR measures. IHEP found
that, when looking at a five-year window rather than the two-year CDR window,
the default rate for the class of 2005 was close to 15 percent27 even though the
national CDR reported a default rate for that same cohort over a two-year period
of only 4.6 percent.28
These data show that student loan defaults are not a phenomenon isolated to a
certain time period. Continuing to evaluate defaults based on a subset of loans
and borrowers is like counting how many people were impacted by the flu in
January when you know that flu season lasts until March. Much more can be
done if there is accurate information on the full extent of the problem.
The switch from a two-year CDR window to a three- year window is a step in the
right direction. The current three-year rate for FY 2010 of 14.7 percent reflects
a rate significantly higher than the two-year 9.1 percent rate29 for that same
2005 Defaulted Borrowers
15%
15%
10%
5%
4.6%
0%
2 Year
CDR
5 Year
IHEP Rate
See for example, Dillon, Erin. “Hidden Details: A Closer Look at Student Loan Default Rates.” Education Sector, October 22, 2007. www.educationsector.org/
publications/hidden-details-closer-look-student-loan-default-rates
22
U.S. General Accounting Office. (1999). Student Loans: Default Rates Need to Be Computed More Appropriately. GAO/HEHS-99-135. Available at: http://www2.
ed.gov/about/offices/list/oig/auditreports/a03c0017.pdf
23
Higher Education Amendment of 1992, Pub. L. No. 102-325, required borrowers be tracked for a two-year period after leaving school for the purposes of
measuring a cohort default rate. Section 436(e) of the Higher Education Opportunity Act of 2008 changed cohort default rates from two-year to three-year.
Section 436(e)(2) established FY 2009 as being the first cohort year that three-year cohort default rates would be released. Schools will be held accountable
for the three-year rate as of 2014, after three years of CDR data has been released.
24
The cohort default rate only tracks defaults on Federal Stafford Loans and Federal Direct Stafford/Ford Loans. Federal PLUS Loans, Federal Insured Student
Loans and Federal Perkins Loans are not included. Federal Perkins Loans have their own CDR calculation.
25
CDR data could be skewed by the inclusion of borrowers in deferment and forbearance in the calculation because these are counted as in repayment even
though they have suspended payment to avoid default.
26
27
Cunningham, A. F & Kienzl, G.S. (2011).
28
U.S. Department of Education. (2013) Two Year Official Cohort Default Rates for School. www2.ed.gov/offices/OSFAP/defaultmanagement/cdr2yr.html
29
Ibid.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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class, and suggests that a five-year rate like that looked at by IHEP could be
higher still. However, because a student loan default will follow a borrower for
his lifetime, well beyond the two (or three) year window schools are incented to
care about, there needs to be a better understanding of how many borrowers
are dealing with the financial challenges that result from falling behind on loan
payments at any point in the repayment process. To ensure that education
debts are not crippling the ability of borrowers to reap the long-term rewards
that their education was intended to impart, it would be wise to have a better
understanding of how student loan default is impacting borrowers in a long-term
way. The current CDR calculation does not do this. Apart from calculation
concerns that don’t reflect an accurate measure of defaults, the current default
data creates the impression that student loan repayment issues are isolated
to certain school types, rather than the pervasive problem that actually exists
for borrowers. For example, on average default rates are highest at for-profit
institutions and community colleges30 while non-profit schools and four-year
public schools have lower default rates. However, examining the data on default
for the 2005 cohort year shows holes that make it clear how much is being
ignored about repayment in general by only focusing on default.
The national two-year cohort default rate for the 2005 class was 4.6 percent—
close to the historic low of 4.5 percent that was reported in 2003.31 The numbers
based on institution type show that there was a CDR of 2.7 percent at four-year
schools and of 8.2 percent at for-profit schools.32 However, according to IHEP,
data on the same groups over an expanded five-year window show a very
different picture. The five-year default rate for students at public four-year
institutions expands to 10 percent of borrowers, while the default rates at the
four-year for-profits increases to 24 percent over five years.33 Taking it a step
further by adding the number of delinquencies that each of these populations
experienced shows that 34 percent of borrowers at public four-year schools and
53 percent of borrowers at four-year for-profits were impacted by the negative
consequences of delinquency or default.34 According to the IHEP data, therefore,
in a year that showed a near record-low CDR of 4.6 percent, in reality only 45
percent of public four-year borrowers and 35 percent of four-year for-profit
borrowers were actively repaying their loans without becoming delinquent,
U. S. Department of Education. (2013) Comparison of FY 2011-2-Year Official Cohort rates to Prior Two Official Calculations. www2.ed.gov/offices/OSFAP/
defaultmanagement/cdrschooltype2yr.pdf
30
31
U.S. Department of Education (2013) National Two-Year Cohort Default Rates. https://www2.ed.gov/offices/OSFAP/defaultmanagement/defaultrates.html
U. S. Department of Education.(2007) Mark Walsh, Presentation to the Federal Student Aid Conference, 2007. www.ifap.ed.gov/presentations/attachments/
Session5407.ppt (adds all for-profit schools and all four-year schools together)
32
33
Cunningham, A. F & Kienzl, G.S. (2011).
34
Ibid.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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defaulting or filing for a deferment or forbearance.35 This reality is far from the
rosy picture that the low 4.6 CDR would portray and emphasizes that even if the
CDR does not flag concern, the repayment struggles of borrowers may not be
vastly different from school type to school type.
2005 Data Compared
53
4-Year For-Profit
4-Year Public
34
24
National CDR
4.6
8.2
10
2.7
4.6
4.6
CDR
IHEP Default
IHEP Def and Delinq
2005 Cohort
Two- Year CDR
Five Year IHEP Default
Five Year IHEP
IHEP Repayment
National
4.6%
2.7%*
8.2%
10%
24%
34%
53%
45%
35%
Four Year Public
Four Year For-profit
*For the 2005 CDR, ED only released combined cohort data for all four-year schools (public and private together) and all for-profit schools. Data was
not broken down into four-year public or four-year for-profit categories. IHEP data was broken down into these categories.
As the data show, while for-profit schools have a much publicized default
problem, other school types have a much bigger issue with delinquency than
can be garnered from a CDR. These borrowers’ repayment issues largely go
overlooked because they may never go into default, but they are having their
credit impacted by delinquency and are struggling to make payments, likely
impacting other areas of their economic lives. These struggles are not quantified
by a CDR, and give many a false impression that repayment of loans is not
a problem.
35
Ibid.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
10
III. There is no good measure to quantify student loan
struggles beyond default
The cohort default rate is clearly not the right metric to understand where
borrowers are in repayment, so what is appropriate and where does current data
fall short? As previously noted, because data on repayment and delinquency are
not disaggregated in reporting by ED, all we can do to understand repayment is
to cobble together data from various other sources.
A. Delinquency
Just one step back in the process from default, student loan delinquency has
most of the same negative consequences as default such as impact on credit
scores and higher costs of credit. Because delinquency is an indicator of pending
default, it also provides an opportunity to cure a repayment challenge before
defaulting.36 As a result, it is important to know just how big the delinquency
problem is and how to use the data effectively to prevent default.
On an individual loan basis, guaranty agencies and loan servicers track and
report student loan delinquency information to ED. However, the federal
government has yet to report that information beyond its walls and articulate
how large a problem delinquency might be and, consequently, the broader
economic result of those repayment missteps. Lacking a definition and precise
data from the federal government, various entities have attempted to determine
the scope of the delinquency problem based on the data available to them.
Federal Reserve Bank of New York Study
Over the last several years, the Federal Reserve Bank of New York has studied
student debt as part of a larger examination of household credit. Using
information on repayment reported to the credit bureau Equifax, the Federal
Reserve found that of the borrowers “who have outstanding student loan
balances as of third-quarter 2011, 14.4 percent …have at least one past due
student loan account.”37
However, the report went on to clarify that these data may not be accurate
because the number of loans reported includes those who are in school or in
grace period. The report states that, “to address this potential bias in calculating
Knapp, L. G., & Seaks T. G. (1992). An analysis of the probability of default on federally guaranteed student loans. The Review of Economics and Statistics,
74(3), 404–411.; Flint, T. A. (1997).Predicting student loan defaults. Journal of Higher Education, 68(3), 322–354.
36
Brown, M.; Haughwout, A.; Lee, D.; Mabutas, M.; & van der Klaauw, W. Federal Reserve Bank of New York, Grading Student Loans, March 5, 2012.
libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html
37
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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delinquency statistics, we exclude individuals who appear to be temporarily
exempt from making payments because they are in school or newly graduated
from school… We find that 27 percent of the borrowers have past due balances,
while the adjusted proportion of outstanding student loan balances that is
delinquent is 21 percent—much higher than the unadjusted rates of 14.4 percent
and 10 percent, respectively.”38 “Past due” in this study potentially includes
anyone who had missed a single payment on their student loan, yet may be
incomplete because the HEA does not actually require this information to be
reported to a credit bureau until three payments have been missed and the loan
is at least 90 days past due. Some entities choose to submit this information to
credit bureaus earlier than 90 days.
The New York Federal Reserve renewed this study in 2012 and found that,
when looking at those loans reported to Equifax that were at least 90 days past
due, the delinquency rate was 17 percent of all borrowers.39 When excluding
borrowers not expected to make a payment due to being in school or using
some form of deferment or forbearance, the delinquency rate was actually
over 30 percent, although the definition of “past due” in this study may include
some portion of those in default on their loans. This study, therefore, only gives
a general understanding of the magnitude of people actually in a delinquency
status on their loans at the time of the report.
Federal Reserve Bank
of New York Borrower
Delinquncy Rates
30%
21%
14.4%
2012
Study
2012
Study
Adjusted
Rate
17%
2013
Study
2013
Study
Adjusted
Rate
Federal Reserve Bank of Kansas
In April 2013, the Federal Reserve Bank of Kansas also took a look at the
delinquency numbers on student loans. Unlike the New York Federal Reserve,
which based its research on borrower data, this study looked at delinquency
on student loan dollars. The Kansas Federal Reserve determined that about 9.7
percent of student loan accounts were past due.40 However, like the New York
study, the researchers had to qualify those numbers and outlined the complexity
of trying to find a precise delinquency figure based on extrapolated data. The
researchers stated that the delinquency rate may understate the problem
because the data didn’t account for how deferment or forbearance should be
included in the calculation. To address this issue, the Kansas Federal Reserve
first computed delinquencies by only counting student loans with a minimum
payment above zero. With that accounting, 17.4 percent of all student loan
dollars in repayment were past due. For another calculation, the Reserve Bank
38
Ibid.
Lee, Donghoon. Federal Reserve Bank of New York, House Hold Debt and Credit: Student Debt, http://www.newyorkfed.org/newsevents/mediaadvisory/2013/
Lee022813.pdf
39
Edmiston, K.; Brooks, L. & Shelpelwich, S. Student Loans: Overview and Issues (Update) April 2013, The Federal Reserve Bank of Kansas City. www.
kansascityfed.org/publicat/reswkpap/pdf/rwp%2012-05.pdf
40
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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“eliminated all loans from the calculation in which balances remained the same
or increased between the third and fourth quarters of 2012, but which were
not considered past due. This approach aims to eliminate loans in forbearance
or deferment, or for those who are still in school. Under this approach, the
outstanding share of those with student loan debt who were delinquent in the
fourth quarter of 2012 was about 23 percent.”41 Again, this measurement gives
an estimate of those struggling to make timely payment, but because of the
need for varying calculations, and the fact that the “past due” payments may
not all be reported until 90 days past due, this report still doesn’t capture the
precise measurements needed.
The two Reserve Banks’ methodologies highlight the different means that
need to be taken to clarify basic data. It is important to note that these Federal
Reserve studies, as with most delinquency and default data, are only a snapshot
of current borrower status as of the time data were collected. When measuring
the performance of the portfolio of federal loans, the definition of delinquency
would be based on the number of borrowers in that status at any given point
in time. Month to month, many more or many fewer borrowers would be in
“delinquent” status. But, just as we need to measure default beyond the first
three years of repayment, we also need to measure the cumulative number of
consumers who were delinquent at any point in the loan payment process, if we
are to truly understand the impact of education debt on the consumer and the
broader economyEven if we accept the delinquency numbers with all caveats,
neither Federal Reserve study fully captures how many people move in and out
of delinquency but never actually default, or the cumulative number of people
who have their credit impacted by delinquency on a student loan.
Federal Reserve Bank of
Kansas Loan
Delinquncy Rates
23%
17.4%
9.7%
2013
Study
2013
Study
Adjusted
#1
2013
Study
Adjusted
#2
Institute for Higher Education Policy
Another approach to capturing delinquency data and remedying this “snapshot”
issue was undertaken by the Institution for Education Policy (IHEP). IHEP tried
to gather more longitudinal data by examining repayment patterns provided
to them by five national guaranty agencies. Through the study, IHEP analyzed
the repayment of nearly 1.8 million borrowers over a five-year period.42 The data
gleaned from this study showed that 26 percent of borrowers were delinquent at
some point over the five-year window examined but did not default.43 Another 15
percent of borrowers had a delinquency that eventually led to default, for a total
of 41 percent impacted by delinquency at some point over that five-year period.44
41
Ibid.
42
Cunningham, A. F & Kienzl, G.S. (2011).
43
Ibid.
44
Ibid.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
13
(Because the IHEP study did not look beyond the five-year window, there is no
data to show whether these numbers would be larger or smaller after five years.)
These are just a few examples of where varying calculations and studies
have attempted to quantify the delinquency problem, but have fallen short
of establishing a concrete number that determines how many borrowers are
struggling with delinquency on a regular basis.
B.Repayment Rates
Ultimately the successful repayment of student debt is in everyone’s best
interest—the federal government’s, the servicer’s, and most importantly the
borrower’s. If repayment is the goal, there should be a serious debate about how
to get more borrowers to actively repay. To do this, we first need to track and
publish a repayment rate that makes sense for helping a borrower eliminate
debt—not just avoid delinquency and default.
Data from the New York Federal Reserve and IHEP revealed similar information
about active student loan repayment. Where the Federal Reserve found 39
percent of federal student loan borrowers are currently in repayment of their
loans, the IHEP study found that after five years of repayment only “about 37
percent of borrowers managed to make timely payments without postponing
payments or becoming delinquent.” 45
Unfortunately there are a variety of debated definitions of what “repayment”
means or should mean on a student loan in order to help borrowers.
Some of these include:
1. That the borrower is actively paying both the principal and interest on a
loan, decreasing the principal.
2.That the borrower is actively paying either the principal or the interest and
the principal may stay the same.
3.That the borrower is actively paying the principal and/or interest on a loan,
or is in a repayment program where no payment is currently due.
4.That the borrower is actively repaying the principal and interest on a loan,
or the borrower is less than 90 days past due.
Depending on the definition and how you parse the numbers, a “repayment rate”
can show very different results.
The Department of Education reports data based on a certain borrower status,
45
Institute for Higher
Education Policy
Five-year Rates
41%
26%
Delinquency
Rate
Delinquency
and Default
Rate
Ibid.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
14
and reports that 50.7 million borrowers have education loans through either the Federal
Family Education Loan (FFEL)46 or Direct Loan (DL) program47 in the third quarter of 2013.
This accounts for the number of borrowers in school, in grace period, in repayment, in
deferment, in forbearance, in default, and an “other” undefined category.48
Just looking at data by payment status, and using the definition of repayment that ED
uses to include delinquency as a repayment, the number of people repaying their loans
appears to be 46.7 percent of the total population of loan holders.
Total Combined
FFEL/DL
FY 13 Q3
Recipients (in Millions
Percentage of Recipients
In-School
Grace
Repayment
(Less than 90
Deferment
days past due
& delinquent
8.8
17.4%
2.4
4.7%
23.7
46.7%
5.5
10.8%
Forebearance Default
Other
Total
3.4
6.7%
0.4
0.8%
50.7
100%
6.5
12.8%
However, if the definition of repayment excludes all borrowers in a repayment status
where no payment is currently due, (in school, in grace, in deferment or forbearance) the
repayment rate jumps to show that 77.5 percent of borrowers are “repaying” their loans.
Exclude In-school,
grace, deferment,
forebearance as
eligible to repay
In-School
Grace
Recipients (in Millions
Percentage of Recipients
0%
0%
Repayment
(Less than 90
Deferment
days past due
& delinquent
23.7
77.5%
0%
Forebearance Default
0%
6.5
21.2%
Other
Total
0.4
1.3%
30.6
100%
The Higher Education Amendments of 1992 (P.L. 102-325) renamed the guaranteed student loan programs the Federal Family Education Loan (FFEL)
Program. The last loan under the FFEL program was made on June 30, 2010.
46
The Student Loan Reform Act of 1993 authorized the Direct Loan Program as a pilot program. The Health Care and Education Reconciliation Act of 2010 made
the Direct Loan program the primary federal student loan program, now Part D of the Higher Education Act. All funding for this program comes directly from the
federal government to the borrower.
47
U. S. Department of Education, Office of Federal Student Aid. (2013). Federal Student Loan Portfolio; Direct Loan and Federal Family Education Loan Portfolio
by Status. Available at: http://studentaid.ed.gov/sites/default/files/fsawg/datacenter/library/PortfoliobyLoanStatus.xls
48
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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If you alter the definition again and look at the universe of repayment as
excluding those borrowers who are in school or in a grace period, so have not yet
passed into the repayment status, the ED data would reflect only 60 percent of
borrowers for whom payment is due are “repaying” their loans. This definition
of repayment is the most valid. There may be very good reasons as to why
someone is using a deferment or forbearance to suspend payment on their
loans, but the reality is that absent that circumstance, they are responsible for
paying their debt and should be counted as one for whom a payment is due.
Exclude In-school,
grace as eligible to
repay
In-School
Grace
Recipients (in Millions
Percentage of Recipients
0%
0%
Repayment
(Less than 90
Deferment
days past due
& delinquent
Forebearance Default
Other
Total
23.7
60%
3.4
8.6%
0.4
1%
39.5
100%
5.5
13.9%
6.5
16.5%
However, attempts to understand the number of borrowers who are actively making
payments to the principal and/or the interest on their loans is trickier to ascertain
from looking at that number since the 60 percent includes those who are delinquent
on their loans. If the most recent Federal Reserve Bank of New York percentage of 17
percent is used as an estimate for the delinquency rate, the number of borrowers who
are actively making payments on their loans would appear to be only 38.2 percent.
Exclude In-school,
grace as eligible to
repay
In-School Grace
Recipients (in Millions
Percentage of Recipients
0%
0%
Repayment
(Less than
90 days past
due)
Delinquent
(based on NY
Fed Rev 17%
of total 50.7)
Deferment
Forebearance Default
Other
Total
15.1
38.2%
8.6
21.8%
5.5
13.9%
3.4
8.6%
0.4
1.%
39.5
100%
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
6.5
16.5%
16
The difference between 77.5 percent and 38.2 percent of borrowers in repayment,
depending on the definition of repayment used, is so wide that it’s almost not worth
doing the math, other than to highlight that we don’t know what we need to about
how many people are on a path to eliminate their student debt by actually making
payments toward the principal of the loans. These data only highlight the flawed
assumption that “repayment” means paying down a debt.
IV. What could access to data help us accomplish?
Clearly there are major gaps in our understanding of repayment data and how
borrowers are really faring with their student loans. Failure to address these gaps
means that there are many borrowers unable to successfully manage their student
loan payment and becoming delinquent when, given all the options available,
simple advice and counsel could have kept them on track to successful repayment.
Student loan delinquency is a problem that has solutions but borrowers need
to be aware of those solutions in order to properly take advantage of them.
The unnecessary delinquency in turn may hurt a borrower’s credit and impact
other financial and life decisions, sending ripples through the economy each
time another borrower becomes delinquent. How big that ripple is can only be
determined by knowing how big a pool of delinquent borrowers there is.
Unfortunately, because of the gaps in data around repayment and delinquency, we
can’t fix or prevent what we don’t know enough about. Thousands of studies will
prove that prevention and early intervention in any activity works far better than
trying to cure a problem after a negative event has occurred. This is true in public
health, early education, financial matters—the list could go on and on. But what
successful prevention programs all have in common is a data set that determines
who best to target service to and when.
Current default data only highlights extreme hardship in student borrowing. What
we really need to know is how many people can actually repay and where they
need help before falling behind in the repayment process. To some degree, default
rates are much like mortality rates. Mortality rates don’t do anything other than
give a stark number of how many people have died. What is important, though, is
an understanding of why they died. What caused it? Is there something that could
have been done to prevent it? If there was earlier detection, could a cure have
been found? What steps could have been taken to make sure that the illness didn’t
occur in the first place? The same analogy can be used when looking at student
loan defaults. All the CDR tells us is how many people have already fallen off the
cliff of default within a narrow time frame. What is needed is more data about what
caused the default, what could be done to prevent it, could we detect the problem
earlier and find a cure, and could we prevent the problem from occurring at all.
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
17
Unfortunately, all we really track is the number of loans that have died. We could
be much more successful in returning federal assets in student lending if we
did more to make sure problems didn’t occur in the first place and held people
accountable for metrics that help, rather than add to the distress of, borrowers.
The majority of current student loan delinquency and default prevention
activities are insufficient to address the entire scope of the problem, mainly
because they are more reactive than preventive. In 1987 when major reforms
were made to the HEA, a tandem issue to the fact that borrowers were defaulting
on their loans was that the federal government did an abysmal job of collecting
on those defaults.49 The incentive structure established at that time to
encourage parties to participate in student loan default recovery put in motion
our current system that incents the cure of default through collections rather
than prevention.
Collecting on defaults does force the majority of borrowers to deal with their
situation, and now, as opposed to in the 1970s, the federal government is
exceptionally good at ensuring they repay. In fact, “the projected cash recovery
rate for defaulting Stafford loans originated in FY2013 is 109.8 percent, meaning
that the collection of principal, interest, and penalty fees would more than offset
the dollars that were defaulted.”50 However, of the total percentage collected,
28.7 percent is paid to third parties to collect on the debt, meaning that when the
cost of collections is factored in, the federal government is able to collect 81.8
percent of revenue from defaulted Stafford loans.51 This is still a very high rate
compared to the national average of only 26.6 percent for standard consumer
collections.52 This only begs the question, if we are able to collect so effectively
on federal student loans, why can’t we put a preventive focus on stopping more
loans from getting to the point of default in the first place? The unfortunate
reality is that defaults continue because the support systems in the student loan
program are not held responsible for how many people are actively repaying, but
for basic due diligence and asset recovery. This has resulted in the situation that
arises today, if you follow the money—all time and attention is spent focusing on
the 10 percent of defaulters, while all others receive minimal support. The entire
system is incented to collect not prevent.
U. S. General Accounting Office, (1971) Office of Education Should Improve Procedures to Recover Defaulted Loans Under the Guaranteed Student Loan
Program (B-117604(7)), Available at: www.gao.gov/assets/200/199977.pdf
49
50
Edmiston, K.; Brooks, L. & Shelpelwich, S (2013).
51
Ibid. 24.
Parry, Wayne. Debt Collectors: Struggling Economy Brings Ups and Downs for Business, Huffington Post, Sept. 21, 2011. www.huffingtonpost.com/2011/09/21/
debt-collectors-bad-economy_n_973987.html
52
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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The one place there has been a focus on prevention since the 1987
accountability measures were put in place is at higher education institutions.
Increased accountability has provided incentives for schools to give borrowers
a better understanding of their loan responsibilities. However, school-based
prevention activities are only the beginning of a prevention approach, not the
end of the conversation. The best methods of prevention provide information
that is personal to an individual’s situation, timely, actionable and ongoing. This
means that information to prevent defaults needs to be available throughout
the life of the loan and allow the borrower to take certain actions to avoid going
down a road toward default. It can’t end when someone separates from school or
moves beyond the default window.
However, existing default prevention policies and processes carried out by
student loan servicers and guaranty agencies further down the repayment
timeline tend to be underfunded, reactive and too late to save the borrower
before their credit is impacted by delinquency. Loan servicers are required to
provide borrower assistance to avoid default and the servicer receives more
federal funding for loans in repayment than for delinquent loans. However, the
loan servicing business model is one built on high transaction volume at a low
per borrower cost. Consequently, servicer-borrower interactions aren’t geared
toward effective delivery of proactive intervention. Instead, the system is geared
toward providing a quick fix that will keep the borrower out of default, like a
deferment or forbearance (thus fulfilling the service contract requirement) but
may not lead to a long-term solution for the borrower. Changing what we are
trying to accomplish—repayment of student loans rather than simply avoiding
default—would change the motivation of those assisting borrowers and force
a conversation about what can be done to assist the broader population of
student loan holders.
Prevention of student loan delinquency is, therefore, the goal to helping more
student loan borrowers successfully stay on track to loan repayment in a way
that will benefit both the individual borrower and the broader economy. But
the means to that end is to first quantify that the problem exists in a clear and
concise way, highlight the scope and breadth of the problem, and show that
student loan repayment struggles are not being addressed by current methods.
There are currently 50.7 million people at various stages of the student loan
process, and it is easy to imagine the magnitude of impact that a prevention
state of mind in higher education financing policy could have on the finances of
these borrowers and their ability to impact the economy at large thanks to the
higher education they have accessed. The only hurdle now is gaining access to
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
19
the right data to show the broad impact that 50.7 million student loan borrowers
are having in countless and unforeseen ways.
V. Recommendations
Default Data
The CDR gives a basis for understanding the number of student loans in default
from an individual school, but it does not go far enough to reflect what is actually
happening to borrowers year after year. Default data should better track
what is happening to individual borrowers over the life of their loan repayment
experience.53
There should also be an effort to take the incentives out of default and move
toward prevention. On paper, current servicer contracts are moving in the right
direction to incent servicers to keep loans in good standing, but the reality is that
the overall structure of the loan program still pays more for collections than for
prevention. As noted earlier, some 28.7 percent of all revenue that is collected on
subsidized Stafford loans is lost in order to pay entities to collect on the loan.54
This totals millions of dollars a year that, if even a small fraction was spent nine
months earlier in the repayment process, could have averted the need to collect
at all—saving both the borrower’s credit and the need to make major outlays to
collectors.
Delinquency Data
There are many indicators of future payment challenges other than a missed
payment that can be developed so intervening at the right moments with
targeted information can be used to get borrowers back on track with their debt
and keep them out of default. Knowing when a borrower becomes delinquent
and moves into other stages on the repayment timeline is vital in order to impact
behavior. However, we currently don’t have sufficient information to lay out
that timeline and know how many borrowers are at risk or on the brink of falling
behind or are already having their credit impacted by delinquency. Delinquency
information must be disaggregated from active repayment when reported by
the Department of Education, so that the scope of the delinquency problem is
well known and can be addressed publically. Unfortunately, until a need can be
articulated, policies to better ensure borrower success won’t be put in place.
The lifetime cumulative default rate collected by the Department of Education is not an apple to apples comparison of the CDR as it include other education
loan types and tracks loans rather than borrowers.
53
U.S. Department of Education. (2012) Student Loans Overview. Fiscal Year 2013 Budget Request. Available at: www2.ed.gov/notclamped/about/overview/
budget/budget13/justifications/r-loansoverview.pdf
54
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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Repayment Data
When it comes to repayment, the biggest change that must be overcome is to
establish a clear, concise and consistent definition of what it means to be in
repayment on a federal student loan.
In July 2010, ED launched an effort to control student loan debt by proposing
regulations that would require institutions to prove they were providing
borrowers with education that enabled them to acquire “gainful employment”
that could help them manage the loan debt they had taken on to get their
credential. One of the proposed requirements was to have programs prove
that at least 35 percent of their borrowers were actively repaying their loans.
The final rule determined that a loan would be considered in “repayment” if a
borrower was making payments toward either interest or paying the principal
on the loan. This is a reasonable standard because it allows for income based
repayment plans to be used but reduces the use of forbearance and deferment
unless absolutely necessary.
Unfortunately, the gainful employment rule came under legal pressure and the
court ruled that it could not be enforced as promulgated.55 ED recently released
new gainful employment regulation that holds schools accountable for the
standard CDR and various other metrics, but does not include a repayment rate.
Even if it is not possible in this political climate to hold schools accountable for
repayments rates, in very few industries is the bar set so low that having only
35 percent of the population repay is an acceptable standard. For the benefit
of borrowers, we should at least understand what those repayment rates are
so that we can strive for more than 35 percent of the population to actively pay
their loan debts.
If we can agree to a definition of “repayment” that works for borrowers, there
are ways already in place to calculate the repayment rate. When ED was putting
together its gainful employment rules, it developed a model that reflects how
many borrowers were not meeting the requirement of having at least 35 percent
of the cohort repaying their loans.56 ED released the draft data publically and
to every institution impacted. Unfortunately, steps have not been taken since
that point to move the needle when it comes to improving repayment numbers.
Instead of reverting to the unknown, wouldn’t it be a step in the right direction for
everyone— schools, borrowers and the public--to know where they stand when it
comes to repayment?
Association of Private Colleges and Universities v. Duncan (No. 11-5174, D.C. Cir. June 5, 2012) http://www.cadc.uscourts.gov/internet/opinions.
nsf/969CEC5FCB92F81685257A14004F3131/$file/11-5174-1377087.pdf
55
U.S. Department of Educaiton (2012) Repayment Rate Data: Frequently Asked Questions, available at: www2.ed.gov/policy/highered/reg/
hearulemaking/2009/integrity-analysis.html
56
MISSING DATA: FOCUSING ON THE WRONG FACTORS COULD CONTRIBUTE TO STUDENT LOAN DISTRESS
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Once a definition of repayment has been agreed upon, ED should commit to an
annual release of the data in line with the annual CDR announcement. Media
reports on the topic typically heighten each year immediately following the CDR
release. Inclusion of all data in this release would bring greater public scrutiny
and, ultimately, needed policy change.
Conclusion
Current data on student debt is inadequate to address how borrowers are really
faring in repaying their debts and, the data that is available only focuses on
the stark population of defaulters while a much larger population of struggling
borrowers languishes in the shadows without acknowledgment or assistance.
We need to change the data tracked, published and talked about in student
lending so that we can show that more people are being impacted by student
loan repayment struggles than just those in the default number.
Understanding data more clearly is not the end all and be all to fixing a problem,
but transparency in data spurs action. Moving the conversation about student
debt beyond just default could have far reaching impacts on the economy by
highlighting the need for early prevention programs that alleviate the negative
financial impacts of student loan debt on the post-college life of a very large
number of borrowers.
The public outcry that led to default accountability in the first place is building
again, but headlines, such as “Student Loan Default Rates Rise for the Sixth
Year,”57 still focus on the number we have. The dialogue needs to change to
address the fact that “Only 38 percent of borrowers are able to successfully
pay down their student loan debt without having their credit impacted by
delinquency or default.” In order to address that new reality of what debt is really
doing to borrowers, we need data that help us better understand the debt and
highlight the struggles of those who have repayment challenges but will never be
counted in a default number. Public and political pressure will continue to fall on
defaults until a light can be shined on the larger problems that are being ignored.
Bidwell, Allie. Student Loan Default Rates Rise for Sixth Year. US News and World Report, available at: http://www.usnews.com/news/articles/2013/10/01/
student-loan-default-rates-rise-for-sixth-year
57
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