WSJ: Big Numbers Divided by Small Numbers Yield Large Percentages

The Wall Street Journal tells us that 1.63 million people are now on IBR, up from *gasp!* 1.32 million last quarter and (avert your eyes innocent readers!) 950,000 in the third quarter of 2013. That’s SEVENTY-TWO PERCENT GROWTH! HOLY COW! (Note: These figures are only for borrowers with Direct Loans. The actual figure is higher when you include guaranteed-loan borrowers.)

…Or it’s just what you’d expect to happen when you divide large numbers by small ones, especially when the government has been lamenting low IBR enrollment rates. Indeed, I recall way back in October 2012 when Inside Higher Ed dared to run an article titled, “An Underused Lifeline,” in which we learned that only 1.1 million borrowers had enrolled in IBR and 474,000 on ICR (clearly one of these two publications knows how the federal loan programs work better than the other).

Apparently, though, the world changed when I wasn’t looking, and now IBR and its friends are monstrous, out-of-control, “fastest-growing forms of financial assistance” because the Obama administration’s efforts to sign people up are working better than intended. Don’t tell the WSJ, but if you include Direct Loan borrowers on ICR, the total is 2.23 million borrowers. Another 850,000 are in “alternative” or “other” repayment plans, which will probably have the same effects as IBR/ICR/PAYE do on the budget. It’s all on ED’s Web site.

It’s like you can report on people signing up for IBR but not the PPACA exchanges.

Aside from mastering basic math skills, there are a few other points worth noting from the article:

(1). Treasury’s deputy secretary Sarah Bloom Raskin says seven million people are currently in default on their government student loans. There are currently 40 million federal loan borrowers, leading to an overall default rate of 17.5 percent. If you’re going to sensationalize the potential losses on IBR, you should be pointing out that the federal loan program has been a disastrous failure all along. Instead, the coverage appears to focus on how to “fix” IBR as in point (4) below.

(2). Thou shalt be specific in thy reportery:

The programs’ popularity comes as top law schools have taken to advertising their own plans that offer to cover a graduate’s federal loan repayments until outstanding debt is forgiven—opening the way for free or greatly subsidized degrees at taxpayer expense.

To my knowledge, only one “top law school” has advertised such plans. The WSJ should have been specific. Also, the story might be newsworthy in law school reporting, but overall, I consider it pretty minor. Georgetown University Law Center grads don’t number 2.23 million and not all of them are on IBR, ICR, etc.

(3). The motivations of the Obama administration:

The Obama administration has sought to boost enrollment in income-based repayment to reduce defaults, which have soared in recent years amid the weak labor market.

If I were cynical, I’d say Obama’s student loan policies are just a ploy to kick the student debt can down the road for his successors to deal with.

Also in case you’re thinking of tarring the Democrats by saying IBR is a handout to the 47 percent or whatever, recognize that it was enacted during the Bush administration.

(4). More Lucky Ducky Debtors:

The Obama administration, while touting the overall benefits of the programs, has voiced concerns that they could benefit some borrowers who need the help the least—namely lawyers and doctors making high incomes. The White House proposed in its budget earlier this year to limit the amount forgiven under the programs.

Has anyone bothered to calculate how many high-debt, high-income lawyers there are on IBR? What proportion are they of the total? How big would the losses be?

(5). …Which leads to the issue of the article’s tone. Consider the title, “Enrollment in Student-Debt Forgiveness Programs Soars in 2014.” IBR is not a “student-debt forgiveness program.” That’s a feature of IBR, not its primary purpose, which is to reduce monthly payments for struggling debtors. Thus, the title misleads readers because it implies that everyone who signs onto IBR will have their loans canceled.

Now, it’s true that the average IBR debt is about $55,000, that many debtors will probably never be able to repay their loans, and that taxpayers will probably have to accept a write-down on student loan debts. However, IBR just masks the student debt crisis. Without these programs, highly leveraged debtors would still be highly leveraged, and taxpayers would still have to cancel many bad student loans. IBR changes none of this other than rescuing people from debt servitude in exchange for tax liens on their incomes.

Despite the sudden hype, we have no idea what the dispersion is for IBR debts (and (future) incomes). It could be that a majority of the IBR debtors have small debts that will be paid off in fewer than 20 years. A bigger problem is the Grad PLUS Loan Program (another Bush-era invention), which is a blank check to the aforementioned lawyers and doctors, or, rather, their universities. Good reporting would have told readers this.

[Note: corrected typos.]


  1. These people are Exhibit A for short-sighted scoundrels.

    Before, the mantra was “IBR all the way, damn the consequences”. Then, later, when people sign up in droves, it’s “Stop the presses! No one saw this coming!”

    I wish I could get paid upper-six-figures for being a waste of someone else’s air; sounds like a sweet gig. Why do these policy makers, “scholars”, Cartel shills, and math geniuses even exist?

    It’s not for the betterment of society, that’s for damn sure. More like the betterment of their respective pocketbooks.

  2. Some typos here. . . Starting with the stuff about Ms. Raskin (not Ruskin), who works for Treasury not Education, as evidenced by her apparent inexperience on student loan issues (doesn’t seem to know yet that you can’t add FFEL and DL borrower counts due to high degree of overlap; more like 6m defaulted borrs. combined). . The good news is that, unlike the mainstream press, which focuses on a few outliers, she realizes that it is generally the borrowers with small debts who default, not those with large debts; the default rate by dollars is much smaller than by loans. .

    Agree on flaws with GU Law meme. Even if every law school said it was doing that, the obstacle is that there are only a finite number of public service, nonprofit and government jobs available for recent law grads and dropouts. WSJ surprisingly also falls into the leftist myth that there is a direct connection between the economy and student loan performance; there is little evidence of such.

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