TRANSPARENCY TUESDAY: Rise in student loan defaults illustrates human toll of economic statistics
It's important, and relevant, to tell the story about the continued employment difficulty facing new college graduates. One way to add depth to the story is to look at the rate at which grads are defaulting on their college loans, which is a pretty good indicator that they're unemployed or under-employed.
Fortunately, several organizations already gather data that, while not providing an optimally complete and up-to-date picture, can be a starting point for journalists trying to capture the depth of the economy's toll on young job-seekers.
The U.S. Department of Education's Federal Student Aid program maintains a searchable database online that shows, by college, how many students are on repayment plans or are in default, for three years running. The figures always have about a two-year lag, however, so -- at a public college, where administrators must answer open-records requests -- it makes sense to ask whether the school is keeping more up-to-date figures internally.
Knowing whether an institution has an unusually high default rate can be instructive, because it suggests (a) that the college is failing to place its graduates in good-paying employment and/or (b) that the college is charging tuition disproportionately above what its graduates can realistically expect to earn. In extreme cases, the Department of Education can declare a school ineligible for federal financial aid if its alumni consistently fail to repay what they owe.
As reported this week by Bloomberg News, student loan defaults also are a profitable business for the debt-collection industry, which gets to keep a commission on anything recovered from borrowers. There are 90 collection agents on the staff at one of the 32 federal collection contractors alone, Bloomberg reports.
According to TRAC, student loan recovery actions nationwide spiked at about 600 new cases filed per month in March 2011. Although the rate of lawsuit filings has come down somewhat since then, they showed another spike in March 2012, TRAC reported. By far the largest number of cases -- 140 -- were initiated in the Central District of California, according to TRAC's compilation.
This SPLC tip sheet will give you more details about gathering and understanding student loan default data, including the limits of the DOE's reporting and how to properly hedge on reporting default numbers so as not to give an unrealistically rosy portrayal of the true nonpayment rate.Tagged: public records, Transparency Tuesday