Oleg Zabluda's blog
Wednesday, January 25, 2017
 
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During its final days the Obama Administration slipped the news that its College Scorecard repayment rates were inflated, and on closer inspection the mistake doesn’t look innocent or innocuous.
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the percentage of borrowers who haven’t defaulted and have repaid at least one dollar of their loan principal. [...] has declined by 20 percentage points to 46%. This is huge. It means that fewer than half of undergraduate borrowers at the average college are paying down their debt.

The rest have either defaulted, sought forbearance or enrolled in income-based repayment plans, which are causing many borrowers who are only making minimum payments to owe more debt due to accrued interest. These income-based repayment plans allow borrowers to reduce their loan payments to 10% of their discretionary income and discharge their remaining debt after 20 years (10 if they work for government or a nonprofit).
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loan forgiveness for borrowers enrolled in the plans could cost upward of $108 billion. [...] the Obama Administration used the inflated Scorecard repayment data as a pretext to single out for-profit colleges for punitive regulation. [...] It requires for-profits in which 50% or fewer borrowers are paying down their principal to post the equivalent of a surgeon general’s warning in all promotional materials.
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Yet based on the updated data, 60% of two-year public colleges and nearly all historically black institutions have repayment rates below 50%.
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Marc Jerome, president of for-profit Monroe College in the Bronx, discovered the Scorecard rate inflation last August. In several emails to Education officials, he urged the department to hold off on finalizing the regulation. If the regulation were applied evenly, a large number of nonprofit and public institutions would fail to meet the standard. But then the justification for the department’s selective regulation of for-profits would vanish.

The department finalized the regulation in October anyway, perhaps anticipating a Hillary Clinton victory that would allow the repayment inflation game to keep going. Yet now it’s taking credit for discovering and fixing the Scorecard error that likely would have been uncovered by the new Trump Administration.
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http://www.wsj.com/articles/obamas-student-loan-fiasco-1485126310
http://www.wsj.com/articles/obamas-student-loan-fiasco-1485126310

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