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Fewer than 400

by Tod Massa 26. September 2014 19:43

On September 25, 2014, InsideHigherEd (and others) reported that cohort default rates had dipped slightly from 14.7% to 13.7%  representing 650,000+ defaulting individuals who entered repayment between October 1, 2010 and September 30, 2011.  On the surface, this is good news. However, we should be mindful that this decrease may quite possibly represent aggressive efforts to move individuals into Income-Based Repayment (IBR) or Pay As You Earn. So, while it is good that a smaller percentage of individuals are facing the legal difficulties associated with default, it does not mean all is well.

The bigger story is that USED "tweaked" the results. Some number of colleges were saved through the removal of "fewer than 400 borrowers" from the recordset. This had the effect of allowing a handful of colleges to avoid exceeding the default limit and thus losing access to Title IV aid.

This bothers me. 

Accountability is tough. It is made tougher when we randomly change the rules, especially to favor some entities over others. Clare McCann and Ben Miller explain the problems nicely.

I'm concerned about the effort it probably took to identify this is very small group of students. Not that I think they did this manually (that would really bother me), but that they ran a lot of models to get to this result. And even more importantly, did not use this as a standard to apply to all institutions. (If you haven't read the articles linked here, and you should, USED identified individuals who had multiple loans handled by multiple loan servicers, with at least one, but not all loans in default.) I would be fine with establishing this as a standard and using it across all institutions, but to just apply it to institutions on the cusp of default is troubling.

Some members of congress have begun to express concern. This is probably not what they intended with the law. It also reinforces concerns about the proposed ratings system. Will USED use such flexible non-transparent approaches with the ratings?

I think this reflects poorly on the Department, no matter how honorable the intent.

Jason Delisle has tried, seemingly unsuccessfully, to get people to pay attention to this chart. Basically, the cumulative default rate of students from two-year public colleges who enter repayment in the 2007 federal fiscal year has risen to 36.3%. This is probably of concern, even though it is of a smaller number of borrowers with smaller loans. Even if it is not an "actual problem" it can very easily and quickly become a "political problem."






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