Sunday, September 9, 2012

How Big Is the Student Loan Default Problem?

The New York Times reports, "A Big Default Problem, but How Big?":
Long-range projections by the Department of Education estimate that the default rate over 20 years, for borrowers who began repayment in 2009, is 17 percent; among students who attended profit-making colleges, the predicted default rate is 49 percent.

It is messy, though, to compare those long-range estimates with the official default rate published by the Department of Education. The long-range estimates are calculated on the dollar amount of loans in default, while the official rate is based on the number of borrowers in default.

Looking at defaults another way, about 15 percent of all borrowers have been in default at the end of the last six fiscal years, which ends Sept. 30, according to Department of Education data. Currently, 16 percent of borrowers are in default, nearly twice the official default rate.
Actually, you can't really default on government loans. They can't be wiped out through bankruptcy, for example. You're on the hook for the money you borrowed, no matter what. More on that from the Times, "Degrees of Debt: Debt Collectors Cashing In on Student Loan Roundup" (via Memeorandum):
Unlike private lenders, the federal government has extraordinary tools for collection that it has extended to the collection firms. Ms. [Amanda] Cordeiro has already had two tax refunds seized, and other debtors have had their paychecks or Social Security payments garnisheed. Over all, the government recoups about 80 cents for every dollar that goes into default — an astounding rate, considering most lenders are lucky to recover 20 cents on the dollar on defaulted credit cards.
I've probably said this before, but I'm not sympathetic to students who take out too much debt. I worked my way through college and didn't take loans until graduate school. I borrowed a ton of money, but my payments are commensurate with my career and earnings. I don't know what young people are thinking when they take out nearly $100 thousand in loans for some worthless degree in post-epistemology gender collectivist studies, or whatever the going discipline these days. Half of these idiots end up at the Occupy Wall Street protests looking like abject progressive scum. It's ridiculous.

More at Memeorandum.


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