The left gives community colleges another free pass for unpaid student loans – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise30th August 2018
A recent New York Times op-ed warns that the student debt crisis is “worse than we imagined” because default rates on government loans are much higher than official statistics show. While the federal government only publishes default rates for the first three years of a repayment cycle, the author of the piece, Ben Miller from the Center for American Progress, obtained five-year default rates from the Department of Education through a Freedom of Information Act request.
Miller’s data reveals that default rates rise sharply after the public tracking period ends, at which point colleges can no longer be held accountable for high defaults among their former students. The piece portrays for-profit colleges as the worst offenders. While three-year default rates are not too different for public and for-profit colleges (11 percent and 15 percent, respectively), the five-year rates diverge. Public colleges’ default rates rise to 14 percent, but for-profit colleges’ rates spike to 25 percent.
Most readers likely didn’t catch the statistical sleight of hand at work here, which dramatically understates the default rates at certain public colleges. Lumped together in the public college category are elite, highly selective schools such as the University of California-Berkeley and open-enrollment community colleges. For-profit colleges, which are also mostly open-enrollment and serve similar populations of students, are more in line with public community colleges rather than the UC-Berkeleys of the nation.
That is why it makes more sense to compare student loan default rates among those two categories of institutions. Ben Miller kindly published the statistics later on Twitter to make just that comparison. Public community colleges have a three-year default rate of 17 percent, which is higher than the rate among for-profits. After five years, the public community college default rate rises to 22 percent — slightly below the for-profit rate, but still in the same league.
Observers have alleged that for-profit colleges push their students into forbearance, which allows students to avoid making payments until the three-year mark has passed and the schools can no longer be held accountable for a poor showing. This gaming drives the spike in default rates from year three to year five.
A Government Accountability Office (GAO) report published earlier this year found ample evidence of such shenanigans, with some schools even hiring third-party firms to place borrowers in forbearance.
But here again, public community colleges get a free pass on the same issue for which for-profit colleges are scrutinized. The GAO found that 37 percent of the institutions which escape the default limits due to high student loan forbearances are public community colleges. More (46 percent) are for-profits, but again, it is hardly an issue unique to the for-profit sector.
Student loan default is a problem that both public community colleges and for-profit schools own. That fact does not change whether one looks at default rates three or five years into the repayment cycle. Default taints all of higher education, not just for-profit colleges, and therefore all of higher education must be part of the solution.
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