A quarterly report on student aid brags of “promising repayment trends,” but it obscures a rise in student loan defaults.
The Department of Education mentions “notable decreases” in the student loan default rate, as they dropped in the first quarter of fiscal year 2016 from 2.5 percent a year ago to 2.3 percent.
What they don’t highlight, however, is a $6 billion increase in the total amount of defaulted loans from the fourth quarter of 2015. Compared to a year ago, the amount of federal student loans in default has increased by $15 billion.
As Jason Delisle, the director of the federal education budget project at the New America Foundation, tweeted, $121 billion of student loans have entered default.
“Over the past seven years, we have taken unprecedented steps to make college more affordable and to help borrowers manage their student loan debt,” Secretary of Education John B. King, Jr. said in a press release.
When looking into the data, however, borrowers have struggled to pay their loans. The $6 billion increase translates into almost 314,000 borrowers in default, a 19 percent increase from the previous quarter.
Default rates have fallen, but the amount has increased.
Even the default rate improvement could be misleading. Borrowers aren’t necessarily earning more; they’re moving into income-based repayment options that lower their monthly payments. By December, income-based repayment enrollees increased 48 percent compared to a year previously, and 140 percent compared to December 2013. Almost 5 million borrowers are now in income-based repayment plans.
Those plans have helped students avoid default, but the default rate decline doesn’t mean that students have found better jobs or avoided financial hardship. Their position simply hasn’t gotten worse.
“We will continue to make more data available to shed light on student debt in America. As President Obama has said, ‘Government should be transparent,’” King said.
The Department of Education, however, isn’t admitting the deeper problem that their data show. It’s “amazing spin,” as Delisle said.
In a recent report from the Treasury Department, student loans have ballooned to 37 percent of government assets.
Default rates, delinquencies, and “hardship deferments” have all fallen. The Department of Education isn’t lying with statistics. However, by ignoring the underlying reasons behind those changes, they’re misleading the public.