Showing posts with label Department of Education. Show all posts
Showing posts with label Department of Education. Show all posts

Wednesday, January 18, 2023

DOE wants to modernize the student loan program but mucks up the planning process

Like a repentant boozer who promises to give up drinking, the Department of Education pledged to modernize its neanderthal student loan program. Unfortunately, like a chronic drunk, DOE simply can't clean up its act.

DOE's own Inspector General audited the Department's modernization efforts and issued a report last week.  The audit concluded that DOE bungled its modernization job.  

Typical of a government document, the Inspector General's report is written in govspeak and is almost incomprehensible.  Here's just one sentence from the audit report, which I urge you not to read:
FSA not completing the required or applicable planning steps or following best practices for acquisition planning for the Next Gen projects we reviewed may have contributed to the stakeholders’ misunderstandings regarding scope, project requirements, and stakeholder needs; and to multiple changes to some of the projects’ solicitations, multiple bid protests, budget deficiencies, and poorly scoped solutions that FSA described in its Summary of Lessons Learned for the Next Gen Enhanced Processing Solution and Interim Servicing Solution projects and in FSA’s Fiscal Year 2023 Congressional Budget Request.

Fortunately, Katherine Knott, an Inside Higher Ed reporter, understands govspeak and translated the auditor's report into plain English. In a nutshell, Knot reported that DOE "didn't follow best practices in budgeting, planning and managing the modernization of its student loan system." Knott also wrote that DOE's Office of Student Aid "didn't complete budget requests for many components of the modernization until after the bid solicitations were issued."Apparently, senior DOE officials couldn't even agree on the modernization initiative's objectives.

As we might expect, DOE's officials had a govspeak excuse for the screwup. Stakeholders, including Congress, were confused and frustrated due in part to "inadequately defined changes in strategy and a failure to account for constituent feedback."

In short, DOE's bumbling effort to modernize its byzantine student loan program ended in a SNAFU: Situation Normal; All Fucked Up."

Hey, man. The situation is normal



Thursday, January 12, 2023

DOE plays Whack-a-Mole with the Student Loan Program: Not a safety net but a noose

According to Techopedia, the term “whack-a-mole” describes a process "where a pervasive problem keeps recurring after it is supposedly fixed."

That's a great description of what the Department of Education is doing with the federal student-loan program.  It's playing whack-a-mole.

Here's DOE's latest fun-house trick to create a "safety net" to "permanently fix a broken student loan system."

The Department is going to revamp its Rube Goldberg system of income-based repayment plans into a new program that will make college damn near free for millions of college students.

As DOE spokespeople explained, student debtors in income-based repayment plans will only be required to pay five percent of their discretionary income toward paying back their loans--no matter how much they borrow!

Pretty sweet. But the deal gets sweeter.  DOE's generous new repayment plan describes discretionary income as 225 percent of a person's income above the federal poverty level.

Here's an example of how DOE's new repayment scheme will work. Single student borrowers will only have to pay 5 percent of their annual income above $30,000 on their student debt. 

Let's suppose a single guy graduates from St. Nobody College owing $58,000 in student loans. (That's the average debt load for graduates of private schools.)

Let's further suppose our guy earns a salary of $55,000 a year, the average starting salary for a recent college graduate.

What will be our guy's monthly student-loan payment on the $58,000 he borrowed to attend St. Nobody? 

The math is simple. He will pay five percent of $25,000 ($55,000 minus $30,000). That's $1,250 a year or $104 a month.

And if our young scholar is married and has two children when he graduates from college, his discretionary income will be adjusted upward. He won't have to pay anything on his student loans--not one fuckin' dime!

Don't take my word for it. That's what DOE's January 10 press release reported. 

How about accruing interest? Under DOE's old income-based repayment plans, small monthly payments on student loans often don't cover accruing interest on the debt, so the debt grows larger with each passing month.

Again, no problem! Education Secretary Cardona's new student-loan bonanza won't charge you interest! 

In sum, Education Secretary Cardona is playing whack-a-mole with the student loan program. Instead of doing something to fix this trillion-dollar problem, he's rolling out a scheme that's designed so that most student borrowers don't have to pay back their debts.

James Kvall, Undersecretary of Education, described DOE's razzle-dazzle plan as a safety net.  But's he wrong. It's not a safety net; it's a noose designed to strangle American taxpayers.

Let's play whacka-mole!








Saturday, October 1, 2022

Consumer Financial Protection Bureau reports that the Federal Student Loan Program is a mess

The Merriam-Webster dictionary defines snafu as "a situation marked by errors or confusion." The word is an acronym for "Situation Normal, All Fouled (or Fucked) Up." 

Earlier this month, the Consumer Financial Protection Bureau issued a report confirming what we already knew:  the federal student program is all f-cked up. The CFPB's publication is titled Supervisory Highlights Student Loan Servicing Special Edition, which doesn't tell you a damn thing about what's in the report. Perhaps that was intentional.

Although the bureaucratic writing style is turgid. The report makes clear that the federal student loan program is spectacularly mismanaged.

Here are some highlights:

The CFPB found that many colleges and universities refuse to release academic transcripts to students who are indebted to their institution.  This practice often makes it impossible for former students to transfer to another school or get a job. The CFPB believes this practice is "abusive under the Consumer Financial Protection Act." Duh!

Second, CFPB criticizes student-loan servicers for bungling the administration of income-based repayment plans. Many borrowers in IBRPs are kicked out of these programs because they failed to certify their annual income annually. Those borrowers are then required to get recertified.

CFPB  accused student-loan servicers of improperly denying borrowers' applications to get reinstated in an IBRP. "Examiners found that servicers engaged in a deceptive act or practice by providing consumers with a misleading denial reason after they submitted an IDR recertification application."

For example, servicers sometimes don't tell borrowers they must certify their income when they were not in an IBRP. Then they refuse to reinstate those borrowers because they didn't provide their income information.

CFPB also accused servicers of giving parent borrowers inaccurate information about their eligibility for an IBRPeligibility.

In short, the CFPB scolded for-profit colleges for withholding academic transcripts and student-loan services for spectacular mismanagement of income-based repayment plans.

Tellingly, the CFPB did not identify a single malefactor or suggest even one substantive action to correct the problems it identified. Instead, it ended its report with this pathetic and syntax-tangled sentence:

Regardless, where the Bureau identifies violations of Federal consumer financial law, it intends to continue to exercise all of its authorities to ensure that servicers and loan holders make consumers whole.

How reassuring! 

Why didn't the CFPB propose that Congress pass a law that would make it illegal for a college to withhold academic transcripts from students, regardless of the reason?

Why didn't the CFPB call for the Department of Education to collaborate with the Internal Revenue Service to determine the annual income of students in IBRPs? It makes no sense for loan servicers to keep borrowers out of IBRPs because they didn't certify their income when the government can quickly determine annual income by looking at borrowers' annual federal income tax returns.

For some reason, the Department of Education and the CFPB would rather keep the student loan program in a snafu condition than take reasonable steps to make it operate more efficiently.

Snafu









Wednesday, July 6, 2022

Federal Reserve Bank of Philly: Student-Loan Payment Pause Just Postpones The Day of Reckoning

 In March 2020, the Department of Education suspended required payments on federal student loans due to the COVID crisis. The feds extended the pause six times, meaning that most borrowers have not made student-loan payments for more than two years. 

Nearly four out of five borrowers benefited from the pause on their student-loan obligations during the pandemic. The question now is whether student debtors can resume making payments when the loan-payment moratorium expires next month.

No one can answer that question definitively, but a recent survey by the Federal Reserve Bank of Philadelphia suggests that many college-loan borrowers will have trouble getting back on track with their student-loan payments when the payment pause comes to an end.

According to the Fed report, borrowers' "chronic repayment struggles are not primarily the result of pandemic-related transitory financial shocks but are more systematic in nature." For most student borrowers, the Fed concluded, "[the payment pause] is simply postponing the day of reckoning with loan payments that [survey respondents] consider unaffordable."

About half the respondents to the Fed's survey whose loans were in abeyance said they could resume making loan payments when the moratorium expires. The other half said they could only make partial or no payments on their student loans.

Moreover, the Fed report pointed out, "A common narrative during the pandemic was that the forbearance period enabled many education loan borrowers to save or deleverage [pay down other debts]." The Fed found, however, that among student borrowers who didn't expect to be able to resume making loan payments, very few were using the moratorium to save or pay down other debts.

Like many reports written by government agencies and policy wonks, the Fed's announcement on expected student-loan repayment contains turgid language and an excessive number of bar charts.

Nevertheless, the Philly Fed said plainly that the long pause on making student-loan payments only postponed the day of reckoning for most distressed student-loan debtors.

Meanwhile, American colleges continue to raise their tuition prices, which means that millions of overburdened college borrowers will see their debt burden become even more onerous than it is now.




Wednesday, October 20, 2021

Take this student loan and shove it: Will student debtors start making payments on their college loans when the government's payment holiday ends?

When we go on vacation, most of us sleep late, basking in the luxury of rising in the morning whenever we wish.

 Then our vacation ends, and we have to set our alarm clock again. And we find it damned difficult to pop out of bed at 6 AM to get to work on time.

 Something like that will happen when the U.S. Department of Education ends its pause on student loan payments. Student debtors enjoyed a grace period on their loan obligations during the COVID pandemic. They could skip their monthly student loan payments without penalty and spend that extra cash on other things—a new car, maybe.

 Millions of student borrowers benefited from this loan-payment holiday, but nobody knows how many will start making monthly payments again when the holiday comes to an end in February.

According to Politico, Education Department officials have instructed loan services to create a "safety net" for borrowers for the first three months after payment obligations begin:

 Borrowers who miss a payment during the initial 90-day period will not take a hit on their credit reports. Those borrowers will instead be automatically placed in a forbearance and be still considered current on their loans.

Student borrowers will appreciate the safety net, but will they start making their monthly loan payments again when the government's loan-payment pause finally ends?

Even before the pandemic, the default rate on student loans was considerably higher than the default rate on credit cards and car loans.

 And this pattern makes sense. Overburdened debtors who stop making car payments lose their cars. If they quit paying on their credit card balances, their cards get canceled.

 But if student-loan debtors stop making payments on their student loans, nothing happens--at least not immediately. 

 predict that student loan defaults will spike upward this spring. Millions of student-loan debtors got permission to stop making payments in the spring of 2020, and they will find it challenging to start writing those monthly payments again, even when they are legally obligated to do so. 

To paraphrase a great country singer, I think many college debtors will take their cue from Johnny Paycheck and tell the Department of Education to take their student loans and shove 'em.












Sunday, January 17, 2021

Surprise! Betsy DeVos's Department of Education rejects Grand Canyon University's application for non-profit status

 Even a blind acorn finds a pig occasionally, and Betsy DeVos's Department of Education finally found a piggy: Grand Canyon University (GCU), which operated as a for-profit institution until 2018.

Last year, DOE rejected GCU's application for non-profit status. This surprised most people because Betsy DeVos is famous for coddling the for-profit college industry.

Not surprisingly, Grand Canyon is suing DOE to overturn the ruling. That's what for-profit colleges do when they don't get their way.

Why did DOE reject Grand Canyon's bid for non-profit status? After all, the university's accreditor and the IRS gave their approval. 

DOE said its decision was based in part on the fact that Grand Canyon University still maintains close financial ties with Grand Canyon Education (GCE), a publicly-traded for-profit corporation. (GCU stock is currently worth about $89 a share.) 

Although GCE sold its university assets to Gazelle University (which operates as Grand Canyon University), GCE still has financial ties to the university from which it profits. 

As DOE explained in an 18-page letter, Grand Canyon's new non-profit owner signed a Master Service Agreement (MSA) with GCE whereby the for-profit entity gets a majority of the revenue from university operations. Specifically:

Despite GCE only taking on the responsibilities of 48% of the operating costs, 60% of the gross adjusted revenue will be paid to GCE under the MSA.  When payments on the Senior Secured Note are included in the analysis, GCE will be receiving approximately 95% of Gazelle's revenue.

DOE also pointed out "that most of [Grand Canyon University's] key management personnel work for GCE, not Gazelle/GCU . . ." Thus, DOE concluded, "as a practical matter, Gazelle is not the entity actually operating the Institution . . . ."

Now you may be asking yourself why Grand Canyon Education, a publicly-traded Delaware corporation, went to the trouble of constructing a deal that would make Grand Canyon University a non-profit.

Undoubtedly, GCE was motivated partly by the desire to make Grand Canyon University seem less venal.  As a non-profit institution, it can claim to be more like traditional non-profit private universities like Harvard, Yale, and Stanford.

And there are regulatory advantages as well. DOE has regulations for the for-profit college industry that don't apply to traditional non-profit universities.

Bud DOE said no, and that was the right decision. A publicly-traded corporation should not be allowed to profit from a university that calls itself a nonprofit while shoveling its revenues to stockholders who are primarily interested in making money.



 


Wednesday, January 13, 2021

Woman enrolls in low-ranked law school, accumulates massive debt, and is academically dismissed only three credit hours from getting her degree: Is that fair?

 Jill Stevenson enrolled at Thomas M. Cooley Law School in 2002. She completed 87 credit hours toward completing her degree, but she was "academically dismissed" because her GPA dropped in her last year of study.

Stevenson took out student loans to pay for her legal education and entered an income-based repayment plan (IBRP) in 2006. This plan required her to make monthly payments on her student debt for 25 years. She made her payments faithfully for 14 years--a remarkable achievement. But her loan balance grew larger with each passing month because of accruing interest.

By the time she filed for bankruptcy and tried to get her student loans discharged, she owed the U.S. Department of Education $116,000, and the debt would continue growing until she finished her IBRP in 1931.  At that time, her student loans would be forgiven, but the forgiven amount is considered taxable income. Thus, when she is in her sixties, Miss Stevenson will face a huge tax bill.

This is a sad outcome, made sadder perhaps because Thomas M. Cooley has been ranked as one of the worst law schools in the United States.  Don't take my word for it.

Garrett Parker, writing for Money Inc., ranked Cooley as one of the 20 worst law schools in the United States in 2019. Parker said Cooley made the worst-law-school list "with flying colors."

Staci Zaretsky, writing for Above the Law (a terrific blog site) in 2018, listed Cooley as one of the ten worst law schools in the nation. In 2018, Zaretsky reported, Cooley admitted 86 percent of its applicants, including 135 students who scored in the bottom 12 percent on their LSAT tests. Cooley was the 2017 defending champion for worst law school, Zaretsky noted drily.

You want another take? David Frakt, "who serve[d] as chair of the National Advisory Council for Law School Transparency, [wrote] that 2017 defending champion Western Michigan University Thomas Cooley Law School repeats for 2018, claiming the number 1 spot on the list of bottom 10 schools."

My point is not to knock Cooley Law School--other people are doing an excellent job of that without my help. But let's think about Jill Stevenson.

Even if she graduated from Cooley, her prospects in the legal field would not have been bright. She made a smart decision to take a job as a paralegal. 

Nevertheless, Cooley dismissed her when she was three credit hours short of graduation. And all that student-loan money Stevenson paid the law school--Cooley kept that money.

And then the U.S. Department of Education shows up to fight her plea for bankruptcy relief, claiming she shouldn't have her student loans forgiven because she smokes cigarettes and cares for a disabled grandson.

This is the way Great Britain treated debtors in Charles Dickens's time. I thought America was better than that.

*****

Note: According to Inside Higher Ed, Thomas M. Cooley Law School affiliated with Western Michigan University in 2013 and changed its name to "Western Michigan University Cooley Law School. In November 2020, Western Michigan University's board of trustees voted to end its affiliation with the Cooley Law School. The disassociation will take three years to finalize. 






Friday, January 8, 2021

Leary v. Great Lakes Educational Loan Services: New York Bankruptcy judge slaps student-loan servicer with a $378,000 contempt sanction

In September 2020, Bankruptcy Judge Martin Glen slapped a huge contempt penalty on Great Lakes Educational Loan Servicers--$378,629.62! Why? Because Great Lakes repeatedly refused to comply with Judge Glen's directives in a student-loan bankruptcy case.

Leary v. Great Lakes Educational Loan Servicers: The facts

In 2015, Sheldon Leary filed an adversary action in a New York bankruptcy court, seeking to discharge over $350,000 in student-loan debt. He amassed this debt to pay for his three children's college education.

Mr. Leary represented himself and properly served Great Lakes, his student-loan servicer. He didn't know, however, that he needed to sue the U.S. Department of Education as well. Great Lakes passed Mr. Leary's complaint on to DOE, but neither DOE nor Great Lakes answered Mr. Leary's lawsuit. In fact, Great Lakes forwarded fifteen pleadings to DOE, but neither DOE nor Great Lakes made an appearance in Judge Martin's court for quite some time.

In 2016, Mr. Leary obtained a default judgment against Great Lakes for failing to respond to his lawsuit, and Judge Glen discharged Leary's student-loan debt. DOE ignored this judgment and sent Mr. Leary two letters threatening to garnish his wages.

More than four years after filing his lawsuit, Leary moved to reopen his adversary proceeding and asked Judge Glen to find Great Lakes in contempt. Great Lakes still did not respond, and on April 29, 2020, Judge Glen held the loan servicer in contempt and assessed sanctions against it for $123,000.

Great Lakes did not pay this assessment, and Judge Glen held a second contempt hearing last August. At this hearing, Great Lakes made several arguments to avoid sanctions. First, it argued that it could not be held in contempt because it had not acted in bad faith. Judge Glen rejected this defense. Whether or not Great Lakes had acted in bad faith, the judge reasoned, it had ignored "clear and unambiguous" court orders and had not diligently tried to comply with them.

Great Lakes also argued that it transferred its loan processing job to another collection agent after Mr. Leary's lawsuit was filed, thus relieving itself of the obligation to respond to court pleadings. But that fact, the judge ruled, did not excuse Great Lakes from its duty to comply with court orders in Mr. Leary's lawsuit.

Finally, Great Lakes argued that sanctions were not warranted because Great Lake’s noncompliance had no impact on Leary’s litigation costs or his indebtedness. 

But Judge Glen didn't buy that argument either. In fact, he pointed out, Great Lakes' inaction had significantly injured Mr. Leary by causing him to suffer "aggravation, pain and suffering, negative credit ratings, loss of sleep, worry and marital strain."

Judge Glen:  Great Lakes was "grossly negligent"

In short, Judge Glen ruled, Great Lakes' inaction had been "grossly negligent" and "really much worse." As for Great Lakes' claim that its legal department was unaware that it was a named party in Mr. Leary's lawsuit, the judge found this argument "unbelievabl[e]."

The judge ordered Great Lakes to pay most of its sanction to DOE, in an amount sufficient to pay off Mr. Leary's student-loan obligations. Thus, in the end, Leary got the relief he sought in 2015.

Judge Glen did not find it necessary to hold DOE in contempt, but he did not find the agency blameless. As he noted in a footnote:

It should not be lost on anyone . . . that DOE's inaction with respect to Mr. Leary--especially when DOE had knowledge at multiple steps along the way that Great Lakes was ignoring its obligations to Mr. Leary as a named defendant in the adversary proceeding--is disappointing to say the least.

Judge Glen finds DOE’s conduct “highly questionable”

Judge Glen's decision fingered Great Lakes as the bad guy in the Leary case, but he found DOE's conduct to be "highly questionable." Obviously, DOE's lawyers knew what Great Lakes was doing and made no objection. It is hard to escape the conclusion that DOE deliberately allowed Great Lakes to flout Judge Glen's orders in order to sabotage Mr. Leary's attempt to discharge his student loans in bankruptcy.

References

Leary v. Great Lakes Educational Loan Services, 620 B.R. 39 (Bankr. S.D.N.Y 2020).



Saturday, October 3, 2020

Leary v. Great Lakes Educational Loan Services: Bankruptcy judge slaps student-loan servicer with a $378,000 contempt sanction

 A few weeks ago, Bankruptcy Judge Martin Glen slapped a huge contempt penalty on Great Lakes Educational Loan Servicers--$378,629.62! Why? Because Great Lakes repeatedly refused to comply with Judge Glen's directives in a student-loan bankruptcy case.  

Leary v. Great Lakes Educational Loan Servicers: The facts

In 2015, Sheldon Leary filed an adversary action in a New York bankruptcy court, seeking to discharge over $350,000 in student-loan debt. He amassed this debt to pay for his three children's college education (p. 1). 

 Mr. Leary represented himself and properly served Great Lakes, his student-loan servicer. He didn't know, however, that he needed to sue the U.S. Department of Education as well. Great Lakes passed Mr. Leary's complaint on to DOE, but neither DOE nor Great Lakes answered Mr. Leary's lawsuit. In fact, Great Lakes forwarded fifteen pleadings to DOE, but neither DOE nor Great Lakes made an appearance in Judge Martin's court for quite some time (p. 3).

In 2016, Mr. Leary obtained a default judgment against Great Lakes for failing to respond to his lawsuit, and Judge Glen discharged Leary's student-loan debt.  DOE ignored this judgment and sent Mr. Leary two letters threatening to garnish his wages (p. 5).

More than four years after filing his lawsuit, Leary moved to reopen his adversary proceeding and asked Judge Glen to find Great Lakes in contempt. Great Lakes still did not respond, and on April 29, 2020, Judge Glen held the loan servicer in contempt and assessed sanctions against it for $123,000.

Great Lakes did not pay this assessment, and Judge Glen held a second contempt hearing last August. At this hearing, Great Lakes made several arguments to avoid sanctions. First, it argued that it could not be held in contempt because it had not acted in bad faith. Judge Glen rejected this defense. Whether or not Great Lakes had acted in bad faith, the judge reasoned, it had ignored "clear and unambiguous" court orders and had not diligently tried to comply with them (p. 9). 

Great Lakes also argued that it transferred its loan processing job to another collection agent after Mr. Leary's lawsuit was filed, thus relieving itself of the obligation to respond to court pleadings. But that fact, the judge ruled, did not relieve Great Lakes from its duty to comply with court orders in Mr. Leary's lawsuit (p. 5).

Finally, Great Lakes argued that sanctions were not warranted because Mr. Leary had not been hurt by its five years of noncompliance with court orders.

But Judge Glen didn't buy that argument either. In fact, he pointed out, Great Lakes' inaction had significantly injured Mr. Leary by causing him to suffer "aggravation, pain and suffering, negative credit ratings, loss of sleep, worry and marital strain" (footnote 11).

Judge Glen:  Great Lakes was "grossly negligent"

In short, Judge Glen ruled, Great Lakes' inaction had been "grossly negligent" and "really much worse" (p. 1). As for Great Lakes' claim that its legal department was unaware that it was a named party in Mr. Leary's lawsuit, the judge found this argument "unbelievable[e]" (p. 11).

The judge ordered Great Lakes to pay most of its sanction to DOE, in an amount sufficient to pay off Mr. Leary's student-loan obligations. Thus, in the end, Leary got the relief he sought in 2015.  

Judge Glen did not find it necessary to hold DOE in contempt, but he did not find the agency blameless. As he noted in a footnote:

It should not be lost on anyone . . . that DOE's inaction with respect to Mr. Leary--especially when DOE had knowledge at multiple steps along the way that Great Lakes was ignoring its obligations to Mr. Leary as a named defendant in the adversary proceeding--is disappointing to say the least.

Another example of DOE arrogance and heartlessness

Judge Glen's decision fingered Great Lakes as the bad guy in the Leary case, but he found DOE's conduct to be "highly questionable" (footnote 4). As the judge pointed out, Great Lakes "sat by, regularly monitoring Mr. Leary's bankruptcy docket until his case was closed and Great Lakes could return his student loans to normal servicing status" (p. 10).

Obviously, DOE's lawyers knew what Great Lakes was doing and made no objection. It is hard to escape the conclusion that DOE allowed Great Lakes to flout Judge Glen's orders and thereby circumvent Mr. Leary's bankruptcy action.

 Great Lakes' behavior and DOE's complicity are despicable. All this shameful conduct must have been approved at the top levels of Betsy DeVos's administration. I say again, Secretary DeVos should be impeached.


References

Leary v. Great Lakes Educational Loan Services, Case No. 15-11583, Adv. Proc. No. 15-01295, 2020 WL 5357812 (S.D.N.Y. Sept. 8, 2020).

Saturday, May 9, 2020

Income-Based Repayment Plans for Student Debtors: Flushing Money Down the Toilet

Congress has been dropping "helicopter money" into the national economy--adding significantly to the national debt, which now exceeds $25 trillion.

That's a lot of money for our grandchildren to pay back. My own grandkids are ambivalent about this situation. My four-year-old says he thinks he can do it if his dad will increase his allowance, but my six-year-old doesn't think it's fair for him to pay for his ancestors' wars in the Middle East.

Now let's look at another economic crisis our grandchildren will pay for--the federal student-loan program.

According to the U.S. Department of Education's own numbers, approximately 43 million Americans have student-loan debt totaling $1.5 trillion.  And, if DOE can read its own balance sheet, it will see that it has basically given up on collecting about a third of that debt.

As of the first quarter of this year, 8.1 million student borrowers are in income-driven repayment plans (IDRs). By the very terms of those plans, these borrowers make loan payments based on their income, not the amount they borrowed. Under most of these plans, borrowers at similar income levels make the same sized monthly loan payments regardless of whether they owe $20,000, $50,000, or $100,000.

Virtually everybody in an IDR is making payments so low that the underlying debt grows larger due to accrued interest--interest that is capitalized.  In other words, virtually no one in an IDR is going to pay off his or her student loans.

How much money are we talking about? DOE's recent report tells us that a half-trillion dollars ($507 billion) are owed by people in IDRs.  In fact, 400,000 people in IDRs owe $200,000 or more.  And--inexplicably--300,000 student debtors are in IDRs who owe less than $5,000.

As Education Secretary DeVos publicly acknowledged in late 2018, the federal government carries student-loan debt on its books as performing loans, which a commercial bank could not do. In fact, she made the astonishing admission that outstanding student loans make up 30 percent of all federal assets!

But in fact, at least 8.1 million student loans are not performing. On the contrary, the IDR programs were designed in such a way that borrowers never pay them back.  

Education Secretary Betsy DeVos announced last year that she was hiring McKinsey & Company, a private consulting firm, to determine just how big the student-debt debacle really is.  So far, she has released no report.

But we don't need a high-priced consulting firm to tell us what is going on. The student-loan program is bankrupt. And while Betsy DeVos sails along on her private yacht, DOE lawyers are hounding desperate student-loan borrowers through the bankruptcy courts, demanding that they be put into IDRs. Those IDR plans can last for as long as a quarter of a century, and virtually no one in such a plan will ever pay off their student-loan debt.



References

Ferguson, Adam. When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany. New York: Public Affairs Publishing (2010) (originally published in 1975).

Saturday, October 19, 2019

Betsy DeVos' Education Department is a clown car, but no one is laughing

For the last three years, the national political debate has focused on international issues: Russia, Ukraine, and now Syria. But look at what's happening at home. More than 45 million people are indebted by student loans, and more than half of these debtors cannot repay what they borrowed. In effect, they are victims of financial homicide.

Betsy DeVos, President Trump's Education Secretary, is spectacularly indifferent to this crisis, and she has made the crisis worse by her callousness and craven obsequence to the for-profit college industry. Without a doubt, she is guilty of malfeasance and venality. Let's summarize her reprehensible conduct:

Public Service Loan Forgiveness. The Department of Education has flatly refused to administer the Public Service Loan Forgiveness program (PSLF) competently.  More than three-quarters of a million borrowers were qualified for the  PSLF program by Navient, DOE's contracted loan servicer. But DOE has only approved roughly 1 percent of the applications for loan forgiveness. Apparently, DOE takes the position that 99 percent of the people who believed they were qualified for PSLF loan forgiveness were mistaken.

A federal judge ruled last February that DOE had administered PSLF arbitrarily and capriciously in a lawsuit brought by the American Bar Association. Later, the American Federation of Teachers sued DOE, arguing, like the ABA, that DOE was administering DOE in violation of the Administrative Procedure Act.  Has Betsy made amends? No.

Borrower Defense Program.  The federal government has a"borrower defense" process in place for student-loan borrowers to have their student loans forgiven if they can show that their for-profit college defrauded them. A few weeks ago, DOE issued new rules for administering the program. Betsy will allow the for-profit colleges to force students to sign covenants not to sue and waive their right to join class-action lawsuits. DOE's revised rules for processing borrower-defense claims are so onerous that DOE itself estimates that only 3 percent of applicants will get relief.

Student-Loan Bankruptcies.  DOE continues to take the position that distressed student-debtors are ineligible for bankruptcy relief, no matter how desperate the debtor's circumstances.  DOE has a policy in place (perhaps unwritten) that authorizes Educational Credit Management Corporation to assume the right to fight student-bankruptcy cases, and ECMC fights them all.  ECMC, by the way, has accumulated a billion dollars in unrestricted assets--a fat reward for naked brutality.

Betsy DeVos, a multi-millionaire who owns a huge yacht, presides over this clown car of an Education Department, which she has stuffed with cronies from the for-profit college industry. And the taxpayers provide her with a personal security detail that costs almost $8 million a year.

This clown car is not funny. Surely DeVos' maladministration of the Public Service Loan Forgiveness program, apart from everything else she has done or failed to do, provides ample grounds for impeachment.  I feel sure that if the Democrats voted articles of impeachment against her in the House of Representatives, some Republicans would vote for it.

And, if her reckless and lawless behavior was brought to the U.S. Senate, I think there would be enough bipartisan votes to remove her from office.

 Without question, 45 million student-loan borrowers would be interested in the outcome of any impeachment proceedings, and several million of these people are probably single-issue voters. In other words, millions of college-loan debtors will vote for the presidential candidate in 2020 who promises student-loan debt relief.  That candidate is not the guy who appointed Betsy DeVos to run the Department of Education.

Betsy DeVos's Education Department is a clown car.



Friday, August 23, 2019

Warning: It can be dangerous to go to college if you are middle-aged

If you are 40 years old and don't have a college degree, you probably want one.  On average, people with college degrees make more money over the course of their lives than people without degrees.

Nevertheless, if you are in your  forties, fifties, or sixties, you must be careful about taking on debt, because you have fewer working years than a younger person to pay it back. And people in midlife or older need to be putting money away for their retirement.

That's why a report issued by the Department of Education earlier this month should be concerning to older Americans. The report is short--just two pages long, but it contains some interesting findings.

Twenty-five years ago, 60 percent of college completers in their twenties (age 24-29), took out student loans to pay for their education. Older graduates borrowed less. Only  about a third of graduates in their forties left college with student debt. Among people aged 50 or older, only 19 percent graduated with student debt.

But student-borrowing patterns have changed. In 2015-2016, 66 percent of college graduates in their twenties had taken out student loans. And among people in their forties, 71 percent had student debt when they graduated. In other words, for people who graduated college in their forties, the percentage who carried debt has doubled over 25 years (from 35 percent to 71 percent).

Moreover, the amount of student-loan debt taken out by students in their forties quadrupled between 1995-1996 and 2015-2016. Twenty-five years ago, people in their forties graduated with an average student-loan debt of $4,400. In 2016, this same age group graduated with $18,800 in student-loan debt (in constant dollars).

The DOE report's findings don't suggest that middle-aged people should not seek a college degree. It is probably a good idea for nearly everyone. But the report contains an implicit warning to older college students: Don't take out more student loans than absolutely necessary because you may have a very difficult time paying it back.

Already, millions of student debtors are enrolled in 25-year income-based repayment plans. A 25-year-old in such a plan will be 50 years old before he or she makes the last loan payment. But a person who graduates at age 50 and is forced into a 25-year repayment plan will be 75 years old. before the plan ends.

Who wants to be making student-loan payments during their retirement years? And remember, elderly people who default on their student loans can see their Social Security checks garnished. Bummer!

Did I make my monthly student-loan payment this month?


References

U.S. Department of Education (2019, August). Changes in Undergraduate Program Completers' Borrowing Rates and Loan Amounts by Age: 1995-1996 Through 2015-2016.

Tuesday, April 16, 2019

More than a thousand college campuses closed over the past five years: The for-profit scourge

Earlier this month, Chronicle of Higher Education reported that 1,200 college campuses have closed over the last five years, displacing nearly half a million students. As Chronicle reporters Michael Vasquez and Dan Bauman explained, most of these campuses were operated by for-profit colleges, which often have campuses in multiple locations.

For example,Vatterot College, Education Corporation of America, and Dream Center Education Holdings closed their doors during the last six months, and together these colleges operated 126 campuses.

As the Chronicle article pointed out, college closures can be traumatic events for students, who are forced to interrupt their studies and search for replacement colleges. Low-income and minority students are disproportionately affected. Seventy percent of the students who attended the closed institutions received Pell Grant aid, and 57 percent are black or Hispanic.

Betsy DeVos's Department of Education is doing everything it can to prop up the venal for-profit college industry, and yet this sleazy sector continues to be under stress. The for-profits are facing increased competition from public universities, which are rolling out their own online degree programs and encroaching on the for-profit colleges' target population. Arizona State University and Purdue University, both public institutions, now have big online footprints.

In addition, more and more Americans have figured out that a degree from a for-profit college almost always costs more than a comparable degree from a public institution and rarely leads to a good job. No wonder the student-loan default rate among for-profit-college students is so high. More than half of the students who borrow money to attend a for-profit college default within 12 years after beginning repayment--four times the default rate of students who attended community colleges.

It is regrettable that so many for-profit college students are having their lives disrupted by the closure of their institutions, but these shutdowns are a blessing in disguise.  Some students will transfer to low-cost community colleges, which will allow them to take out smaller student loans or avoid student loans altogether.  Those that transfer to public institutions are likely to  have more rewarding educational experiences than they were getting at these dodgy for-profit outfits.

In short, it may seem shocking that so many for-profit colleges are closing, but it is undoubtedly a good thing. In spite of everything that Trump's Department of Education has done to aid the for-profit college racket, this industry is in trouble. The for-profit colleges are a blight on American higher education. Let us look forward to the day when they are extinct.


Sunday, December 23, 2018

We're checking our list! We're checking it twice! Has Navient been naughty? Chinnock v. Navient Corporation

Julie Anne Chinnock sued Navient Corporation, the U.S. Department of Education, and a Navient student-loan trust a few days ago, seeking two forms of relief. Ms. Chinnock wants compensation for an invasion of her privacy and a declaratory judgment that she does not owe Navient, DOE, or the trust any money.

As Chinnock said in her complaint, the controversy is quite simple and easy to resolve. "Defendants claim that they own certain student loans under which [Chinnock] is indebted to them, and [Chinnock] denies that defendants own such loans."

This case is reminiscent of the old robo-signing scandal during the home-mortgage crisis about ten years ago. Investors bought pools of home mortgages that were on the verge of default; but when the investors tried to foreclose on the homes, they couldn't prove they owned the underlying debt.

Apparently, Navient is in the business of packaging student loans into asset-backed securities and marketing them to investors. A lot of these student loans are going into default, but the buyers of those packaged loans are sometimes unable to show they have an ownership interest in the debt.

As Ms. Chinnock relates in her complaint, Navient is a bad actor:
Navient has a proven reputation for its predatory lending and collection practices. A 2014 Consumer Finance Protection Bureau Report found Navient's illegal loan servicing practices to include: (1) attempts to collect debts not owned by it; (2) unfounded negative threats (i.e. damage to borrower's credit), and (3) failing to correctly apply payments, among other predatory practices.
Ms. Chinnock also alleges that in 2017, "Navient was the most complained-about student loan company in all 50 states." She says that Navient was named in 530 federal lawsuits over a three-year period and that it was fined $97 million by the U.S. Justice Department for illegally charging students excessive interest rates.

Regarding her own complaint against Navient, Chinnock claims she paid off all her student loans in the amount of about $190,000 and was never delinquent on any of them (page 15 of her complaint). Nevertheless, in August 2018, Navient claimed she owed on eight additional loans totally several hundred thousand dollars.  Chinnock demanded proof that Navient's principals owned the loans, and Navient refused to provide any documentation.

Is this case a big deal? It is a VERY big deal. As Chinnock's lawsuit illustrates, lenders in the real estate industry and the student-loan business have gone to court to collect on debts they can't prove they own. Basically, they relied on a "take-my-word-for-it-loan-ownership ploy." For a while, the courts played along, allowing so-called lenders to get judgments against people who denied they owed anything.

But it is a basic principle of law that a creditor must prove ownership of a debt in order to get a judgment against a debtor. So far at least, Navient hasn't produced a shred of evidence that Julie Anne Chinnock owes it money.

If Ms. Chinnock wins her lawsuit, Navient should get ready for plenty more.

References

Julie Anne Chinnock v. Navient Corporation, Navient Solutions, Navient Student Loan Trust 2014-3, & the United States Department of Education, Case: 1:18-cv-02935. Verified Complaint (Ohio Ct. Common Pleas, Dec. 20, 2018).








Tuesday, October 2, 2018

Department of Education slow rolls the Public Service Loan Forgiveness Program: Like a drunk weaving through traffic

For many years, the Department of Education has managed the federal student-loan program like a drunk creeping through heavy traffic. It has stumbled, reeled, dissembled, weaved and bobbed, but always avoided a head-on collision with reality.

But that time is over. Under Betsy DeVos's colossal mismanagement (and her predecessors), DOE has messed up the Public Service Loan Forgiveness Program (PSLF), thereby telegraphing to 44 million student-loan borrowers that Betsy Devos is either fiendishly devious or spectacularly incompetent.

The PSLF program is not complicated.  Under federal law, student-loan borrowers who work for a qualified employer (governmental agency or non-profit) and make 120 student-loan payments under an approved repayment plan are eligible to have remaining student-loan debt cancelled. (It's a little more complicated than that, but not much.)

Almost 1.2 million borrowers have applied to have their employment certified for PSLF eligibility. More than a quarter million applications were denied. That alone is a startling fact.

But it gets worse. About 28,000 people who are in the PSLF program (or at least believe they are in it) applied to have their student loans forgiven based on their representation that they had made the 120 required student-loan payments. How many people have obtained debt relief so far? Less than 100!

What are we to make of this gigantic snarl?

First, DOE has made the PSLF program needlessly complicated. After all, the government only needs to answer two questions to determine who is eligible for debt relief. Did the applicant work for an approved employer for 10 years? Did the applicant make 120 one-time payments on his or her student loans?

Second, the PSLF program was poorly designed, and DeVos's DOE has reached the startling realization that the program is astonishingly expensive.  In my opinion, DOE is dragging its feet about processing PSLF claims to postpone the reckoning day, when it will have to publicly admit that PSLF is going to cost taxpayers billions of dollars.

The Government Accountability Office (GAO) released a report almost two years ago that concluded DOE had underestimated the cost of various student-loan repayment options. I'm guessing DOE did not figure on the huge debt loads some PSLF applicants were accumulating from going to graduate school: MBA degrees, medical degrees, law degrees, etc.

According to GAO, the average amount of forgiven debt for the first 55 people who received student-loan forgiveness is almost $58,000. If  this average continues to hold, and all 890,000 people whose loans and employment were certified eventually get debt relief, the cost will be $50 billion! Meanwhile, DOE can expect PSLF requests for certification and debt relief to continue being filed into the indefinite future.

No wonder DOE is slow rolling the PSLF loan-forgiveness process.



 References

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.



Thursday, June 21, 2018

Smith v. U.S. Department of Education: A severely stressed student-loan debtor gets bankruptcy relief and the judge questions harsh interpretation of "undue hardship"

Kirt Francisco Smith, a 39-year-old unemployed man with severe health problems, won a bankruptcy discharge of his student-loan debt--almost $50,000.

 Every student-loan debtor's victory in bankruptcy court is something to celebrate; we don't see enough of them. Smith's victory, however, is especially cheering because the judge explicitly challenged the harsh standards the federal courts are using when determining whether student-loan debt is an "undue hardship" eligible for bankruptcy discharge.

Here's Mr. Smith's story as as chronicled by Bankruptcy Judge Frank Bailey. Smith took out $29,000 in student loans to enroll in a computer drafting program at ITT Tech. He completed the program in 2008  but was unable to find a job in the computer drafting field. By the time he filed for bankruptcy his debt had grown to $50,000 due to accumulated interest and fees.

Smith suffers from major health problems. He is afflicted with intractable epilepsy, which prevents him from having a driver's license. In addition, Smith has been diagnosed with affective disorders, including anxiety and depression leading to suicidal ideation. In 2006, he was hospitalized at McLean Psychiatric Hospital; and he has not been employed since that hospitalization. He began receiving Social Security Disability payments in 2007.

During the trial, which stretched out over five days, Smith argued that he could not pay back his student loans and maintain a minimal standard of living for himself and his dependent mother.  And indeed, Smith and his mother lived on the brink of utter poverty.

Smith received $1369 a month in Social Security income and his mother received $792.26 in Social Security. The two also receive food stamps, which the judge included as income. Altogether then, Smith and his mother lived on $2265.26 a month, which is about $80 less than their expenses.

The U.S. Department of Education opposed a discharge of Smith's student loans, dragging out its usual objections. Smith never made a single payment on his loans, DOE argued, and therefor did not handle his loans in good faith. Smith did not renew his paperwork to stay in an income-based repayment plan--another sign of bad faith.  Finally, DOE objected to the modest sums Smith spent on travel and entertainment.

Fortunately for Smith, Judge Bailey rejected all DOE's arguments and discharged Smith's student loans. The judge utilized the "totality-of-circumstances" test for determining whether Smith's student loans constituted an undue hardship rather then the harsher Brunner test.

Remarkably, Judge Bailey criticized both the Brunner test and the totality-of-circumstances tests. "I pause to observe that both tests for 'undue hardship' are flawed," he wrote (p. 565). In the judge's view, "[t]hese hard-hearted tests have no place in our bankruptcy system."

Judge Bailey then went on to articulate a more reasonable standard for determining when a debtor's student loans can be discharged in bankruptcy.  "If a debtor has suffered a personal, medical, or financial loss and cannot hope to pay now or in the reasonably reliable future," the judge reasoned, "that should be enough" (p. 565).

In particular, Judge Bailey criticized other courts' focus on the debtor's good faith.
[A]ny test that allows for the court to determine a student debtor's good or bad faith while living at a subsistence level, virtually strait-jacketed by circumstances, displaces the focus from where the statute would have it: the hardship. It also imposes on courts the virtually impossible task of evaluating good or bath faith in debtors whose range of options is exceedingly limited and includes no realistic hope of repaying their loans to any appreciable extent.. (p. 566)
What an astonishing decision! To my knowledge, Judge Bailey is the first bankruptcy judge to explicitly attack both the Brunner test and the totality-of-circumstances test. (Judge Jim Pappas criticized the Brunner test in Roth v. ECMC.) Just think how many suffering student-loan debtors would qualify for bankruptcy relief if every judge reasoned like Judge Bailey.

Brenda Butler,  for example, who handled her student loans in good faith only to see her loan balance double over a 20 year period, would have obtained relief if Judge Bailey had been her judge. Ronald Joe Johnson, a bankrupt student-loan debtor who made $24,000 a year by working two jobs, would be free of his student loans if he had appeared in Judge Bailey's court instead of a bankrkuptcy court in Alabama. Janice Stevenson, a woman in her mid-fifties who had a record of homelessness and who lived in rent-subsidized housing and had an income of less than $1,000 a month, would have won a bankruptcy discharge of more than $100,000 in student debt if only Judge Bailey's standard had been applied rather than the harsh rule applied by Judge Joan Feeney.

Today, Judge Bailey's decision in the Smith case is just a straw in the wind, but the day will come when bankruptcy courts will apply his standard universally. After all, as some wise person observed, if a debt cannot be paid back, it won't be.  Right now, about 20 million people are unable to pay back their student loans.  Almost all of them are entitled to bankruptcy relief under the rule articulated by Judge Frankk Bailey.

References

Butler v. Educational Credit Management Corporation, No. 14-71585, Adv. No. 14-07069 (Bankr. C.D. Ill. Jan. 27, 2016).

Johnson v. U.S. Department of Education, 541 B.R. 750 (N.D. Ala. 2015).

Roth v. Educational Credit Management Corporation490 B.R. 908 (9th Cir. B.A.P. 2013). 

Smith v. U.S. Department of Education (In Re Smith), 582 B.R. 556 (Bankr. D. Mass 2018).

Stevenson v. ECMC, Case No. 08-14084-JNF, Adv. P. No. 08-1245 (Bankr. D. Mass. August 2, 2011)

Tuesday, November 14, 2017

Department of Education Coming to Jesus Moment With For-Profit Schools. Article by Steve Rhode

By  on November 10, 2017
99 percent of student loan fraud claims come from for-profit colleges and schools.
I’d love to tell you I absolutely think the current Trump administration Department of Education is going to get the message that for-profit colleges are problematic, but I doubt it.
The Century Foundation has obtained data from the U.S. Department of Education through a Freedom of Information Act (FOIA) request which paints a very clear picture of issues surrounding for-profit schools and student loan fraud issues. I can’t wait to see the magic the Department of Education uses to make these facts go away or not be relevant.
Out of the total of 98,868 complaints reviewed by TCF, for-profit colleges generated more than 98.6 percent of them (97,506 complaints). Of these complaints nonprofit colleges generated 0.79 percent (789 complaints) and public colleges generated 0.57 percent (559 complaints).
Approximately three-fourths of all claims (76.2 percent) were against schools owned by one for-profit entity, the now-closed Corinthian Colleges (75,343 claims). Removing Corinthian from the analysis, the vast majority of claims, over 94 percent, were still against for-profit colleges (22,160 of the 23,525 non-Corinthian claims).
Claims are concentrated around fifty-two entities—forty-seven for-profit companies and five nonprofit institutions—that have each generated twenty or more borrower defense claims. Of these five nonprofits, three converted from for-profit ownership.
The backlog of fraud complaints—currently numbering 87,000 not yet reviewed—is increasing, with the number of new claims submitted per month averaging approximately 8,000 since mid-August.”
The data uncovered while for-profit schools account for ten percent of student enrollment the students who attended were 1,100 times more likely to file a fraud claim.

*******

This article appeared on The Get Out of Debt Guy site. Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve here.

Thursday, September 28, 2017

The Department of Education's Official 3-Year Student-Loan Default Rate is Baloney

During the First World War, it is said, the British military kept three sets of casualty figures: one set to deceive the public, a second set to deceive the War Ministry, and a third set to deceive itself.

Over the years, the Department of Education has released its annual 3-year student-loan default rate in the autumn, about the time the pumpkins ripen. And every year the default rate that DOE issues is nothing but bullshit. I can't think of another word that adequately conveys DOE's mendacity and fraud.

This year, DOE reported that 11.5 percent of the the 2014 cohort of debtors defaulted on their loans within three years and that only ten institutions had default rates so high that they can be kicked out of the federal student-loan program. That's right: among the thousands of schools and colleges that suck up student-aid money, only ten fell below DOE's minimum student-loan default standard.

Why do I say DOE's three-year default rate is fraudulent?

Economic hardship deferments disguise the fact that millions of people aren't making loan payments. First of all, DOE has given millions of student-loan borrowers economic-hardship deferments or forbearances that allow borrowers to skip their monthly loan payments.  These deferments can last for several years. 

But people who are given permission to skip payments get no relief from accruing interest. Almost all these people will see their loan balances grow during the time they aren't making payments. By the time their deferment status ends, their loan balances will be too large to ever pay back.

The colleges actively encourage their former students to apply for loan deferments in order to keep their institutional default rates down. And that strategy has worked brilliantly for them. Virtually all of the colleges and schools are in good standing with DOE in spite of the fact that more than half the former students at a thousand institutions have paid nothing down on their loans seven years after beginning repayment.

Second,  DOE's three-year default rate does not include people who default after three years.  Only around 11 percent of student borrowers default within three years, but 28 percent from a recent cohort defaulted within five years. In the for-profit sector, the five-year default rate for a recent cohort of borrowers was 47 percent--damn near half.

DOE's income-driven repayment plans are a shell game.  As DOE candidly admits, the Department has been able to keep its three-year default rates low partly through encouraging floundering student borrowers to sign up for income-driven repayment plans  (IDRs) that lower monthly loan payments but stretch out the repayment period to as long as a quarter of a century.

President Obama expanded the IDR options by introducing PAYE and REPAYE, repayment plans which allow borrowers to make payments equal to 10 percent of their discretionary income (income  above the poverty level) for 20 years.

But most people who sign up for IDRs are making monthly payments so low that their loan balances are growing year by year even if they faithfully make their monthly loan payments. By the time their repayment obligations cease, their loan balances may be double, triple, or even quadruple the amount the originally borrowed.

Alan and Catherine Murray, who obtained a partial discharge of their student-loan debt in bankruptcy in 2016, are a case in point. The Murrays borrowed $77,000 to obtain postsecondary education and paid back about 70 percent of that amount. But they ran into financial difficulties that forced them to obtain an economic hardship deferment on their loans.  And at some point they entered into an IDR.

Twenty years after finishing their studies, the Murrays' student-loan balance had quadrupled to $311,000!  Yet a bankruptcy court ruled that the Murrays had handled their student loans in good faith, and they had never defaulted.

DOE is engaged in accounting fraud. If the Department of Education were a private bank, its executives would go to jail for accounting fraud. (Or maybe not. Wells Fargo and Bank of America's CEOs aren't in prison yet.)  The best that can be said about DOE's annual announcement on three-year default rates is that the number DOE releases is absolutely meaningless.

This is what is really going on. More than half of the people in a recent cohort of borrowers have not paid down one penny of their student-loan debt five years into the repayment phase of their loans.  And the loan balances for these people are not stable. People who are not paying down the interest on their student loans are seeing their loan balances grow.

In short, DOE is operating a fraudulent student-loan program.  More than 44 million Americans are encumbered by student-loan  debt that totals $1.4 trillion.  At least half that amount--well over half a trillion dollars--will never be paid back.

Betsy DeVos' job is to keep the shell game going a little longer, which she is well qualified to do. After all, she is a beneficiary of Amway,  "a multi-level marketing company," which some critics have described as a pyramid scheme.

Betsy DeVos: The perfect person to oversee DOE's student-loan shell game

References

Paul Fain. Federal Loan Default Rates Rise. Insider Higher ED, September 28, 2017.

Paul Fain. Feds' data error inflated loan repayment rates on the College ScoreboardInside Higher Ed, January 16, 2017.

Andrea Fuller. Student Debt Payback Far Worse Than BelievedWall Street Journal, January 18, 2017.

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 ratesWashington, DC: Brookings Institution (2015).

Murray v. Educational Credit Management Corporation, Case No. 14-22253, ADV. No. 15-6099, 2016 Banrk. LEXIS 4229 (Bankr. D. Kansas, December 8, 2016), aff'd, Case No. 16-2838 (D. Kan. September 22, 2017).

Joe Nocera. The Pyramid Scheme Problem, New York Times, September 15, 2015.