Showing posts with label Ben Miller. Show all posts
Showing posts with label Ben Miller. Show all posts

Monday, August 27, 2018

Ben Miller, where the hell ya been? Center for American Progress finally wakes up to the magnitude of student-loan crisis

Ben Miller, senior director of the Center for American Progress, reminds me of a fuddy duddy who falls asleep at a wild party in a friend's apartment.  Just as the party starts to get interesting, he nods off on a pile of party goers' coats.

 Meanwhile, the party spins out of control: fights break out, spontaneous trysts are consummated in closets and spare bedrooms, furniture is broken, lamps are shattered. When the fuddy duddy awakes, the apartment is in shambles and the police are cuffing drunken revelers and hauling them off to jail.

"Did I miss something?", the fuddy duddy asks as he rubs the sleep from his eyes.

Miller wrote an op ed essay for the New York Times on August 8 titled "The Student Debt Problem is Worse Than We Imagined?" Ya think? Where the hell have you been, Mr. Miller?  You're like the guy who went out to buy popcorn just before the steamy scene in Last Tango in Paris.

So here is what Mr. Miller said in his op essay: student loan default rates are much higher than the Department of Education reports. I hate to break it to you, Ben; but people have known that for years. Everybody knows the for-profit colleges have been hiding their default rates by pushing their former students into deferment programs to disguise the fact the suckers weren't paying on their loans.

In fact, the problem is probably worse that Miller described it in the Times. Looney and Yannelis reported in 2015 that the five-year default rate for the 2009 cohort of student borrowers was 28 percent (Table 8).  And the five year default rate for the 2009 cohort of for-profit students was 47 percent--almost double what Miller reported for the 2012 cohort--only 25 percent.

Admittedly, Miller is looking at the 2012 cohort of debtors, while Looney and Yannelis analyzed the 2009 cohort. But surely no on believes the student-loan problem got better in recent years. Everyone knows the crisis is getting worse.

Miller's analysis briefly mentions the federal push to put student borrowers in deferment plans,  but that problem is more serious than Miller intimates. In fact 6 million student borrowers are in income-based repayment plans (IBRPs) and are making payments so small their loan balances are getting larger and larger with each passing month due to accruing interest.  For all practical purposes, the IBRP participants are also in default.

But Mr. Miller can be forgiven for waking up late to smell the coffee. Perhaps Miller, like the New York Times that published his essay, was so distracted by Stormy Daniels and the Russians that he was late to notice that American higher education is going down the toilet.  And surely, we can all agree that the person pressing down on the toilet-bowl handle  is Betsy DeVos.

What happened while Center for American Progress was snoozing?



References

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default rates. Washington, DC: Brookings Institution (2015). Accessible at: http://www.brookings.edu/about/projects/bpea/papers/2015/looney-yannelis-student-loan-defaults

Ben Miller. The Student Debt Problem is Worse Than We Imagined. New York Times, August 8, 2018.

Saturday, October 21, 2017

For-profit colleges are exploiting African Americans. But you already knew that.

The National Center for Education Statistics issued a report in early October on long-term, student-loan repayment patterns, and two independent analyses highlighted the loan repayment patterns for African Americans.  Almost half of all black students who entered postsecondary education in 2003-2004 (49 percent) had defaulted on at least one of their student loans within 12 years.

Think about this statistic for a moment.

The consequences of defaulting on a student loan are catastrophic: a ruined credit rating and a ballooning loan balance due to penalties, collection fees, and accelerating interest.  Individuals who default on their student loans will be crippled in their ability to buy a home, marry, have children, or save for retirement.  And bankruptcy relief, although not impossible, is very rare for student-loan debtors. In short, most people who default on their student loans will be burdened by their debt for the rest of their lives.

Who would construct a student-aid system that ruins the lives of half the African Americans who participate in it?

And the story gets worse.  Three out of four black students who took out student loans to attend a for-profit college and then dropped out defaulted within 12 years. In essence, African Americans who borrow to enroll in a for-profit institution and don't finish their programs are playing Russian roulette with their financial futures--Russian roulette with three bullets in a four-shot revolver.

As an Inside Higher Ed article noted, the Department of Education "has not collected much data on student debt that can be broken out by the race or ethnic background of borrowers." Why not? Because DOE does not want the public to know that African American are getting ripped off by the higher education industry--and the for-profits, in particular.

The historically black colleges and universities (HBCUs) benefit from the status quo, the for-profit industry benefits from the status quo, and Congress benefits from the status quo because our legislators take campaign contributions from entities that depend on federal student-aid dollars--including the private equity funds that own some of the for-profit colleges.

Will these recent reports, which highlight racial exploitation in higher education, bring about change? I seriously doubt it. Everyone who is profiting from the federal student-aid program is playing a short game. The insiders want to make as much money as they can before higher education collapses--and collapse is fast approaching.

Russian roulette with four bullets

References

Paul Fain. Half of black student loan borrowers default, new federal data show. Inside Higher Ed, October 17, 2017.

Robert Kelchen, New Data on Long-Term Student Loan Default Rates. October 6, 2017.

Ben Miller. New Federal Data Show a Student Loan Crisis for African American Borrowers. Center for American Progress, October 16, 2017.


Saturday, April 4, 2015

What was your first clue, Sherlock? A Chronicle of Higher Education writer explains that some colleges are gaming their student-loan default rates

Colleges must keep their student-loan default rates down or they will lose their right to participate in the federal student loan program. If a college's three-year default rate (as measured by the Department of Education) reaches 30 percent for three consecutive years, that college can be kicked out of the federal student loan program. And most colleges cannot survive without federal student-aid money.

Ben Miller, writing for Chronicle of Higher Education, explains how colleges can artificially keep their student-loan default rates down, hiding the fact that a lot of their students are not paying back their loans.  As Miller points out, DOE's student-loan default measure only calculates the percentage of defaulters who default within three years of beginning repayment--which is a very short window of time.
[B]ecause the measure tracks results for such a short time, it is possible for colleges to game the metric by artificially lowering the number of students who default within three years. How? A college can encourage borrowers to ask for a forbearance--an option in which the federal government allows borrowers to stop making payments without their loans becoming delinquent or heading toward default. Since it takes almost a year to default, the college needs borrowers to enter forbearance for a couple of years, ensuring they cannot show up in the default rate, even if they never make a single payment.
In fact, as Senator Harkin's Senate Committee documented in its report on the for-profit college industry, many for-profits aggressively encourage students to apply for economic hardship deferments, which are ridiculously easy to obtain.

That is probably why the three-year student-loan default rate for for-profits actually went down a bit according to DOE's 2014 student-loan default rate report. The for-profits are adept at getting their former students to sign up for economic hardship deferments that obscure the fact that these students are not making their loan payments.

Miller argued persuasively that a better measurement of student-loan defaults would be compare the number of students going into repayment at a college compared to the number of graduates.  Students who are going into repayment without graduating have lower rates of success than graduates in terms of getting good jobs, and they also have higher student-loan default rates.  Therefore, a college that has a high level of students beginning repayment compared to the number of graduates is probably a college that has a high student-loan default rate.

So what did Miller find?  Among public 4-year institutions, 84 students went into repayment for every 100 graduates.  But in the 4-year for-profit sector, 233 students went into repayment for every 100 graduates.  In other words, more than twice as many students attending 4-year for-profit institutions began repayment (in the most recent cohort of borrowers) than obtained degrees.

That is a very bad sign, and a strong indicator that the for-profits have much higher student-loan default rates than DOE's anemic metric shows.  It seems reasonable to conclude that the true student-loan default rate in the for-profit sector is at least twice as high as DOE reports; it is probably at least 40 percent!

The Obama administration surely knows that the number of students who default on their loans is much higher than DOE reports every year and that the true default rate for students who attended for-profit institutions is alarmingly high.

But so far at least, the for-profits have evaded effectively regulation; and they have hidden their true default rates by encouraging their former students to sign up for economic hardship deferments. Meanwhile they suck up about one quarter of all the federal student-aid money while only enrolling about 11 percen of all the post-secondary students.

Some day this house of cards will collapse, and the public will realize that the for-profit colleges have unacceptably high student-loan default rates. And we will have to face the fact that millions of people --mostly low-income and minority students--have defaulted on their loans and have had their lives wrecked by the fact that they attended for-profit institutions.

References

Ben Miller. Student-Loan Default Rates Are Easily Gamed. Here's a Better Measure. Chronicle of Higher Education, March 26, 2015.