Thursday, August 12, 2010

Let's see the numbers

There is plenty of evidence that shows us that default rates are terrifyingly high. On another related note, M. Pilon at the WSJ recently put out a piece about the fact that student loan debt rates were higher than credit card debt rates, and I think we can all connect the dots to what the means vis-a-vis default rates. Since I've been covering this material for a long time, carrying out my own research, and have now been in touch with thousands and thousands of debtors, this information comes as absolutely no surprise to me. Moreover, Tim Ranzetta has put out some solid evidence about the increase in default rates, too. Ranzetta refers to the WSJ in this post from 2009, and adds, "to provide some insight into how these default rates rise as the loans continue to age, the Department recently released cumulative lifetime default figures for the 2002 cohort which saw its overall cohort default rate rise from 5.2% at its first measurement point in 2003 to 11.5% five years later." There is also strong evidence that suggests that 1 in 3 Federal student loans are now in default. So I think it's safe to assume that the bubble has burst here.

On two separate occasions, a reader, who is clearly an insider, has decided to challenge my claim that their is indeed a student lending crisis. I've asked this person to discard their anonymity and have an open conversation with me either here or via email (if they were bold enough to send me emails revealing their actual identity, I would certainly keep that confidential).

On my post about Kelly Field's piece on student loan default rates at the Chronicle of Higher Education, they made this remark [truncated version]:

"Meanwhile, more recent rates of default and delinquency continue to decline (except on the high-risk non-federal loans to trade school students which continue to languish). Makes you wonder whether the 'awareness' of the powerful collection tools of the guaranty agencies, federally-guaranteed lenders and collection agencies promulgated by SLJ and others has 'backfired' by strengthening and reinforcing the old postsecondary [sic] system at all levels. It could also be that the vast majority of students and parents don't borrow more than they can handle (many still don't borrow at all), and the focus should be assisting the minority that has gotten in over its head."

At this point, I am not sure if the reader is agreeing or disagreeing with me. It is safe to assume that they are taking a jab at me as well as another advocate for student debtors. Regardless of their take on my work, they are clearly claiming that defaults are on the decline. In the short post I wrote about M. Pilo the reader, and I'm presuming it's the same person, because the language and tone are similar in both remarks, wrote:

"Educational loan total balances are actually over $900 billion. Oh well, a reporter facing a deadline meets a garrulous but error-prone pundit: results are predictable.

Another one-sided story. Most students don’t borrow, and for the vast majority who do borrow, the debt is quite manageable. Oh well, I guess an article about a borrower paying $150 per month for several years is too boring for the newly-chic WSJ . . ."

I am not aware of defaults or delinquencies going down recently in any sector. In addition, if such information is available, perhaps this reader, who's clearly in the know, would be willing to submit it to me, so that I could publish it. Moreover, this commenter then separates out the for-profit sector.

Here's what I had to say to them, too: "Provide me with the evidence that debt is quite manageable. I don't buy it. On that note, I will be sending your comments to two contacts I have in the Dept. of Education. I'd like to see proof of this claim."

Until they show me the numbers, I ain't buying these claims.


Nando said...

Cryn, I saw this comment and immediately realized the person is (a) delusional; (b) willfully ignorant/stupid; (c) an employee of the Higher Education Industrial Complex; or (d) clueless as to the sitation facing younger generations of Americans.

Tuition has skyrocketed, while the American economy has been re-structured. There exists a glut of the following professional in this country: lawyers, engineers, MBAs, PhDs, and SEVERAL other Master's degree holders. The schools get paid up front - IN FULL. The student is left to pay the principle plus interest for the next 25-30 years.

Cryn Johannsen said...

I don't know what to make of these comments. I'd say this person is way off. That's why I'm asking for evidence. Back it up! I think I've been more than honest about my own findings, and I'm not alone. We know there's a crisis. I think they're either (a) trolling or (b) goading me.

Unknown said...

It's been my experience that most people who are anonymous, are either fakes, cowards, or work for the org.

Anonymous said...

If you have access to the full Chronicle of Higher Education article, their charts indicate surprisingly-low longterm default rates, even after 10 years of repayment, for the categories of institutions where the vast majority of students and parents have obtained their federal education loans. For example,

What is wrong with "separating out the for-profit sector," or, rather, putting it in context, i.e., not 100% of borrowers as you are implying? Yes, if we are talking 10 years ago, and you want some long-term defaults, categories such as for-profits and community colleges are very small (until the 2000s, tuitions at many community colleges were so low that state and federal grants covered most students' costs, without the need to take out loans, and the for-profits were still sharply reduced in numbers from the enormous purge of shady schools during the early 1990s). If you are talking about today, the market share has changed, but then you don't have many defaults yet to look at. Can't have it both ways.

In any given academic year, about one-third of undergraduate students borrows. For those who complete a bachelors degree -- a tiny percentage of any year's total student population -- two-thirds have incurred some debt by the date of graduation.

The students who borrowed $0 are excluded from the average and median calculations provided in the scary headlines. The much-touted average of $20K (for bachelors completers) would be less if you included the zeros.

In addition, of course, the schools like to point out that median is always less than average -- which is skewed by some outliers such as undergrad pharm students.

Out of the outstanding student loan debt, the percent that is in default has been seven to eight percent and has declined over the past 20 years, although it could be argued that this is skewed by the fact that borrowing has increased over time. This information is in the annual audits as well as the President's annual budget, although it requires some lengthy calculator or pencil-and-paper arithmetic to put together.

Cryn Johannsen said...

Are you kidding me?!? You're trying to convince me with numbers put out by the COLLEGE BOARD? That's just hogwash. Do you know what I wrote about that so-called "organization for colleges and universities?" Have you ever heard of a book called, Lying with Statistics? I don't buy it, and I've been in touch with thousands and thousands of debtors. You're claims are just absurd. I have a different story to tell, and it's out there and people are listening. I refuse to accept numbers put out by the COLLEGE BOARD and for good reason.

Cryn Johannsen said...

That claim that the "average person" borrows around $20k is just ridiculous. Who cares about "averages?" That's a convenient way to ignore the fact that there is a student lending crisis. I will crush the College Board, just as I will crush and reorganize the entire student lending structure.

Anonymous said...

If you read the fine print, it is not actually from the College Board, just their "pretty charts." As usual they are taking credit for someone else's stuff. It is from the National Center for Education Statistics, and it is a public data set from a peer-reviewed quadrennial study, so you can run the numbers yourself if you want, but you will get the same results.
And, of course, the results will be even lower if you include the students who don't graduate. You can do averages and medians, centiles, and so on.

You may be thinking of graduate & professional students who generally have much higher average debts than undergraduates. Again, a public data set is available.

Cryn Johannsen said...

That's great. Here's the problem with statistics. What about the people who are technically "making it," but they are a job loss or medical problem away from outright default. Or they live with their parents and don't pay their credit cards. Or they are not buying a house or car or having children. Your last point is true, but who cares? Is doesn't tell a full picture. Believe me there are a lot of people in these positions that I just mentioned, and statistics make it black and white. So, that doesn't tell us the full story. There are millions of people who are in a very, very gray area, and that's exactly why it's a problem. Don't even get me started on those who have fled the country (read "brain drain"). To say nothing about the larger context of America's consumer economy and the role that millions of people don't have in it. I too have done my research, and the indentured educated class share their stories of struggle with me on a daily basis. That's why this site is getting so much attention, and why I plan to run for office on a platform to solve this issue.

gail said...

I would definately like to see some backup from "Anonymous" I can personally name 50 people right now that have college loans over 23K that are either closing in on the end of their deferment time (and still can't make pymts) or are already in default. Those that I know that are managing to scrape pymts. together every month have absolutely no quality of life left at all and don't see any in their future. Wake up Anonymous and smell the coffee, but first you have to find someone who can still afford it!

Cryn Johannsen said...

Gail, I'm receiving private emails from this person, too. They are using a nom de plume, and I think they're working for the student lending industry. I know people who follow this closely (inside the Dept. of Ed and elsewhere), and they aren't making these sorts of claims at all.

Anonymous said...

My wife and have student loans, that we took out as married people, for three years of grad school for her and four years of undergrad. We bought a house the same year (2000) we started school.

This sounds crazy, but homes in Savannah, GA were cheaper than rent. Our mortgage payment, including escrow for taxes and insurance, is less than $800 monthly. Our combined student loan payments are about $1400.

This means that we could be investing or spending into our struggling economy $1400 every month. For the next 30 years.

That is over $500,000 that we can not spend on healthcare, transportation, food or anything else. That money could be going to the "ailiing" automotive industry, farm families, income for service industry workers or any other actual people who need jobs or job security.

Anonymous said...

Now that my student loans are completely beyond any hope of ever paying off, I think about death a lot.

In some ways, I am less afraid of dying, because it would mean freedom at last from a lifetime of dread and fear.

Fear of old age and debt.

Fear of my mental health after 20 more years of carrying around the tag of "debtor" .

I'm not saying I am going to kill myself (although I have thought of it).

I tend to isolate myself now. I feel like a social Pariah, and would just be a burden upon anyone I might get involved with.

A merry Mr. Micawber I am not.