Categories:  'Education as an Economic Issue'  

Pervasive Lack of Transparency Around Student Debt

The federal government holds a portfolio of almost $1 trillion in student loans, "many of which appear to be troubled," but the Department of Education [...]

The federal government holds a portfolio of almost $1 trillion in student loans, “many of which appear to be troubled,” but the Department of Education refuses to either analyze the loans itself, or let an outside agency analyze them.

This leaves citizens and taxpayers unaware of how their tax money is being used, while lenders and borrowers are unable to quantify the risks of student loan debt. Questions like “Which colleges leave students underwater, with low earnings and large debts they can’t pay?” and “how many borrowers are eligible for federal debt relief?” go unanswered.

In fact, the Education Department provides so little information that the Federal Reserve purchased credit reports from a private credit-reporting agency to obtain the data the central bank needs about student loans. While other federal agencies and state departments of education have found ways to securely share loan and tax data with researchers, former officials cite “a lack of will” and “the reluctance of senior political leadership” in the Education Department to release information.

On the other side of the equation, students are not adequately informed of the risks of borrowing, even as student loans have become America’s second-largest category of consumer debt, surpassing both credit card debt and car loans. The lack of data prevents colleges and other organizations from identifying risk factors and students and graduates who need additional support – a situation that leaves students and graduates more vulnerable to default and bankruptcy.

Private corporations profiteer off the system of federal student loans and the low- and middle-income students who use them – see “Predatory For-Profit Colleges Use Students to Tap into Federal Funds” (tag: ForProfitColleges) for more on this subject.

Picture credit: Matthew Billington

Articles

Publication Date: 20/03/2015
Source: The New York Times
Author: Susan Dynarski