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US Government Caught Massively Fabricating Student Loan Default Data
Zero Hedge ^ | 01/19/2017

Posted on 01/19/2017 10:11:47 AM PST by SeekAndFind

Ever since 2012 we have warned that one of the biggest threats arising from the US student loan bubble - which is no longer disputed by anyone except perhaps members of the outgoing administration - is not that it is soaring at an unprecedented pace, that's obvious for anyone with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government - either on purpose or due to honest miscalculation - was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality.

An the WSJ reported overnight "many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed."

The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed.

A spokeswoman for the Education Department said that the problem resulted from a "technical programming error."

And so, the infamous "glitch" strikes again.

How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own "fake data."

According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

As the WSJ adds, this isn’t the first time data problems have affected the Education Department: a recent government report criticized how the department tracks information including the budgetary implications of student loan forgiveness.  “This is a quality control issue with a Department of Education that has been facing criticism already for other data issues,” Robert Kelchen, an assistant professor of higher education at Seton Hall University.  The department “needs to be regularly audited so these issues can be discovered sooner.”

There is another interpretation: as we reported yesterday, when we revealed that a Chinese province admitted it had fabricated fiscal data for the period 2011-2014, the reason the data were made up "because officials wanted to advance their careers." One can imagine that the career pressure for those government workers who would report, and be held accountable, for revealing the true picture of America's disastrous student loan bubble, would be likewise staggering.

* * *

Going back to the report findings, the student loan repayment rates were originally released in 2015 as part of the Obama administration’s College Scorecard, which followed an aborted attempt to rate colleges and tie federal funds to those ratings.

At the time, the Journal reported that at 347 colleges and vocational schools, more than half of students had defaulted or failed to pay down their debt within seven years. Those figures were based on students were supposed to start repaying loans in 2006 and 2007.  In September, the Department released data tracking students who should have begun repayment in 2007 and 2008, and that number rose to 477. But with the updated number released last week, that number grew to 1,029. Worse, no college saw its repayment rate improve under the revision, and some schools saw their seven-year repayment rates fall by as much as 29%.

The worst offender was the University of Memphis which had one of the largest drops in its repayment rate following the recalculation. Previously, the Department said that 67% of its students were repaying loans within seven years of entering the repayment period. That number fell to 47% after the recalculation.

The University was not happy. In a statement, the school said it “was not contacted by or made aware of the data changes” from the Education department.  “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data,” the statement said.

The far more dire implications, however, are for broader student loan market, because if the latest unfabricated data suggesting that loan delinquencies are rapidly rising toward 50% across most of America's colleges, then the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

 

Apply default rates of 40-50% to this number, and the bill to the US taxpayer for the next mass bailout starts taking shape.



TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: default; fabrication; government; studentloans
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To: Attention Surplus Disorder

You add their debt to their fed tax bill and tell the IRS they all vote Republican.

Next problem?


21 posted on 01/19/2017 10:26:11 AM PST by Blue Collar Christian (I thank God, Broom Hillary was stopped. Now, moving on, I pray for Trump.)
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To: SeekAndFind
at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.

This may be misleading. Most students defer paying interest on student loans while attending and most defer making payments for a year beyond. That amounts to adding 5 years of additional interest to the amounts borrowed and payments are not being made until the 6th year. The likelihood that the payments in the last year or two is enough to offset the interest accrued while attending school is pretty low. In addition, may students will continue to defer payments in early years of working.

22 posted on 01/19/2017 10:27:28 AM PST by Raycpa
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To: arthurus

Ping to thread.


23 posted on 01/19/2017 10:27:43 AM PST by ConservativeMind ("Humane" = "Don't pen up pets or eat meat, but allow infanticides, abortion, and euthanasia.")
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To: SeekAndFind

“..at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.”

“pay down at least $1”?

In other words, half the students have defaulted.

This is a disaster and I would suggest that, in the interest of combating servitude, the students should be released from paying interest. I would also suggest that the hue and cry that everyone should go to college should be tamped down. Probably, the half that have defaulted are the half that statistically drop out of college.

Looks like students borrowing money from the government to go to college is a ponzi scheme to throw money at the colleges.


24 posted on 01/19/2017 10:28:28 AM PST by odawg
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To: SeekAndFind

Student loans were to be a new form of indentured servitude to banks. However, I think the Government couldn’t even plan that scenario out right because they have allowed massive job losses in the economy.


25 posted on 01/19/2017 10:30:27 AM PST by Bayard
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To: odawg

>Looks like students borrowing money from the government to go to college is a ponzi scheme to throw money at the colleges.

As someone who works in colleges, you are correct.


26 posted on 01/19/2017 10:32:39 AM PST by RedWulf (TRUMP TRUMP TRUMP!)
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To: SMARTY

No offense, but do you have any idea what kids are taught in public school these days?

It’s 12+ years of propaganda that they HAVE to go to college. You won’t be able to find a job if you don’t, and if you do you’ll be lucky if you work at a cash register for the rest of your life.

It’s the biggest propaganda campaign probably in existence, it’s why kids have nervous breakdowns over SAT scores.

I’m speaking as somebody who went through this myself, I can only imagine things have gotten worse since Obama took over.

And nobody is asking you to bail them out, but the debt load is odious and was coerced into thousands of people who didn’t know any better. Sallie Mae, Navient, and the associated cronies in the university racket should be forced to eat their losses.


27 posted on 01/19/2017 10:37:06 AM PST by Shadow44
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To: SeekAndFind
I wonder if this really matters in a post-truth world???

It must not since the major media are not reporting on it but I did see that Michelle Obama taking one more stroll thru the White House with her dogs is a major news...

28 posted on 01/19/2017 10:40:37 AM PST by fatez (Ya, well, you know, that's just your opinion man...)
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To: SeekAndFind

Never get a degree that has more than two words in it. Three if one of the words is Engineering.

Never get a degree that you have to explain what it means.

Never get a degree in anything with the word Studies in it.


29 posted on 01/19/2017 10:41:11 AM PST by Blood of Tyrants (Conservatives love America for what it is. Liberals hate America for the same reason.)
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To: odawg

>>Looks like students borrowing money from the government to go to college is a ponzi scheme to throw money at the colleges.<<<

This would be correct, from someone who knows many kids who were lied to by universities as well about what their rights were. In fact, the whole process is more like a fox watching a chicken coop, since it is in universities interest to get students paying as much as they can for as much as they can get a loan from the government for.

Fafsa loans should have only been offered to people who had a work history post high school graduation. Kids who have never lived on their own have no idea what taking out a student loan actually means.


30 posted on 01/19/2017 10:41:16 AM PST by Bayard
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To: SeekAndFind

de-facto loan forgiveness


31 posted on 01/19/2017 10:46:08 AM PST by Buckeye McFrog
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To: SeekAndFind

There couldn’t possibly be any connection with this and the fact that Democrats have been jabbering about loan forgiveness for the past 4 years? Sort of like telling illegal immigrants that it’s ok to vote in U.S. elections because no one’s going to do anything about it.

Just restart the narrative that all students will be required to repay their loans. . .no forgiveness. However, colleges are welcome to cover part of the cost since their tuitions are nothing less than extortion. Put the responsibility on the colleges that have been treating the federal government like a piggy bank, knowing that young people do not have the experience or judgment to know better than too take out exorbitant loans.


32 posted on 01/19/2017 10:53:25 AM PST by gspurlock (http://www.backyardfence.wordpress.com)
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To: SeekAndFind
the reason the data were made up "because officials wanted to advance their careers."

The find of the year. People lie when it is in their best interest to lie. Who knew?

33 posted on 01/19/2017 10:53:26 AM PST by AndyJackson
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To: SeekAndFind
... either on purpose or due to honest miscalculation

One somehow suspects that many, many such alleged "miscalculations" from various govt agencies will be surfacing in the very near future.

34 posted on 01/19/2017 10:54:31 AM PST by Seaplaner (Never give in. Never give in. Never...except for convictions of honour and good sense. W. Churchill)
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To: TexasFreeper2009

EVERYTHING the government does becomes a CLUSTER F$&@ every DAMNED thing they touch!!! The audacity of these bastards questioning the Treasury Secretary about the housing crisis WHEN THESE FOOLS CREATED THE DAMNED THING in the first place!!!! EVERYONE DESERVED to have a home whether they were capable of paying for it or NOT!!! These BASTARDS threatened the banks if they did NOT give out mortgages like lollipops, THEN they stand back and SCREAM about the banks like their hands in the mess are as clean as the driven snow!!! THESE BASTARDS make me SICK!!!


35 posted on 01/19/2017 10:55:54 AM PST by Trump Girl Kit Cat (Yosemite Sam raising hell)
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To: Shadow44

“... nobody is asking you to bail them out...”

They’re IN schools because their tuition is funded by US tax revenue

WE already paid ONCE, and we’ll pay again when our OWN kids need tuition and it’s covered by us. WE work so our kids aren’t eligible for special consideration....or special tuition arrangements.


36 posted on 01/19/2017 10:55:55 AM PST by SMARTY ("What is freedom? To have the will to be responsible for one's self. "M. Stirner)
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To: Shadow44

I agree with that STATEMENT entirely, these SOB’s have PUSHED kids into college when MANY would have been SO MUCH BETTER OFF in a trade school!!! WELDING, HVAC, PLUMBING, CAR MECHANICS, all make GREAT money and have the opportunity to open their own small businesses!!!! These kids AND their parents have had their brains filled with mush and VERY EXPENSIVE MUSH at that!!!!


37 posted on 01/19/2017 11:02:12 AM PST by Trump Girl Kit Cat (Yosemite Sam raising hell)
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To: Jumper

Make the Federal Reserve absorb the losses.

_______________________________________

Nope. The money went to colleges and universities. Demand it back from them. If they fail to repay - cut them off from ALL future funding.

Remember a few months ago when federal student loans were denied to ITT Tech?

That was it. Game over. They closed. Immediately. That same day.

And THAT is exactly what needs to be done now. Today. To all these worthless colleges.


38 posted on 01/19/2017 11:08:26 AM PST by Responsibility2nd
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To: rdcbn; All
"Now, after 8 years of cover up
and kicking the can down the street,
the enormity of the disaster
that was the Obama Administration
is now beginning to come to light
as the Obama’s hit the road...."


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39 posted on 01/19/2017 11:10:32 AM PST by musicman (Until I see the REAL Long Form Vault BC, he's just "PRES__ENT" Obama = Without "ID")
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To: SeekAndFind

Smells like another government employee slush fund. A misplace decimal point here, a fake loan there. Lining their wallets. Trump should hire some honest accountants to go over every line for the past 8 years.


40 posted on 01/19/2017 11:11:46 AM PST by bgill (From the CDC site, "We don't know how people are infected with Ebola")
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