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When’s The Student Loan Money Coming Back?

Oct 9, 2017 by

By Neal McCluskey –

A new report on federal student loans from the National Center for Education Statistics came out today, and it is troubling. Much of the media attention is likely to focus on the default rates of borrowers who attended for-profit colleges—and they are atrocious—but the report’s contents condemn the entire system.

Delving into the data reveals that there is a whole lot of defaulting going on—among first-time students who began school in 1995-96 and took out federal loans, 13.7 percent had defaulted on their most recent loan—but there’s been a whole lot of deferring payment, too. The share of borrowers who were deferring or in forbearance stood at 13.3 percent. 31.8 percent were still repaying. And the 41.3 percent listed as “paid or closed without default” hadn’t necessarily fully paid off their loans, either. No, “this includes either loans that are paid off by the borrower or forgiven [italics added].”

As for students attending for-profit schools, yes they had the highest default rate. But, remember that for-profits take on the students with the greatest obstacles to success while receiving essentially no state subsidies or tax-preferred donations. Indeed, they pay taxes. Their default status for students starting in 2003-04—during the for-profit boom—is terrible at 34.8 percent. However, community colleges came in at 15.7 percent, which is also awful, given their low, directly subsidized prices and considering that, while their students often have significant obstacles, students at for-profit schools tend to have bigger ones. Of course, a smaller percentage of community college students borrow. And default rates at about 9 percent at public and private, nonprofit, 4-year colleges is hardly anything with which to be impressed.

The higher education system is flooded with taxpayer money producing oodles of negative results, including skyrocketing costs, credential inflation, and increasingly anemic learning. The federal loan story told by these data reinforces how much draining needs to happen, and a good place to start is phasing out federal loans.

Source: When’s The Student Loan Money Coming Back? | Cato @ Liberty

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