Less Debt, Fewer Defaults, and More IBR

…Is everything you needed to know about last week in the world of federal student loans.

We have The Wall Street Journal‘s Morning Editorial Report … um … editorializing on the “Surge in Student Debt Forgiveness.” The whole article is subscription required, but it appears the WSJ is continuing its biased reporting on IBR by sloppily characterizing it as a loan-forgiveness program rather than a program whose intended purpose is to reduce monthly payments. That’s not to say I don’t think IBR will cost the government a lot of money or that the average amount borrowed is high enough to indicate that a lot of these debtors borrowed Grad PLUS loans, but this is pretty shrill. Like, how dare an income-based repayment program base people’s repayments on their incomes? What’s next Social Security securing society from old people starving to death in the streets??

On the other hand, we have The Washington Post, which does a much better job of pondering why student loan defaults are dropping. IBR is part of it, as is slightly better job outcomes for graduates. It even concedes that college graduates are finding jobs that don’t require their degrees. Clearly the author has not gotten the memo on occupations.

Finally we have an article by … me. This very post you’re reading. Recently, the Department of Education released its fourth quarter report of total student loan volumes by institution. The slightly good news is that last year the aggregate disbursement fell below $100 billion.

Aggregate Federal Loans Disbursed (Current $)

The bulk (43 percent) of the $5.9 billion decline is in unsubsidized Stafford loans to undergraduates, and 37 percent were due to subsidized Stafford loans (which now go only to undergraduates). The rest (1/4th) is due to unsubsidized Staffords to graduate students. Grad PLUS loan disbursements grew by half a percent. Can’t win ’em all, I guess.

As for the amount disbursed per recipient (in current dollars, for loan limits aren’t inflation-adjusted and that’s the benchmark to measure changes against), most of the loan types saw negligible declines, indicating that either fewer people are taking out federal loans or fewer Americans are going to college.

Meanwhile, since the Internet tells us that Thomas Jefferson School of Law is in trouble, I figure it’s time to check in on those freestanding private law schools. TJSL isn’t alone, it just hasn’t managed to find a public university to socialize it yet (see WSJ, there’s your Social Security quip!). Western State fused into Argosy University two years ago, but I heard that was a long time coming. Texas Wesleyan is now Texas A&M, and some of the formers’ graduates want diplomas that say they went to the more reputable latter. Chalk one more up for the signaling hypothesis. Finally, the University of New Hampshire (formerly Franklin Pierce Law Center) is in fact now the University of New Hampshire. Go figure.

Oh, and how could I forget: Thomas M. Cooley is now affiliated with Western Michigan University.

I’ve heard rumors of other mergers going on among the FSP law schools, but that’s four that are adapting to the new world. TJSL just happens to be dealing with its fiscal problems by having a fiscal crisis.

There’s more to be said on this, but I figured I’d leave you with a chart comparing the average amount borrowed per recipient of federal loans at each of these law schools to their total costs for full-time students according to the Official Guide.

Average Amounts Borrowed Over Full-Time Costs at FSP Law Schools (2013-14)

I draw your attention to the fact that at none of these schools can a full-time law student cover his or her tuition with just unsubsidized Stafford loans. (Also, it seems that some law students are cleverly borrowing more than the annual loan limit allows. Hm.) At the average FSP law school last year, 87 percent of students took out Stafford loans; 70 percent borrowed Grad PLUS loans.

Fin.

2 comments

  1. Does the Washington Post actually know the prevalence (or lack thereof) of IBR use in the FY 2011 cohort (those who entered repayment during Oct. 2010-Sept. 2011 six months after dropping out or completing a degree or certificate)? The bottom line is that default rates will be declining but it will have nothing to do with “the economy” or IBR use. It is simply a function of declining proprietary school market share. Just as the economy had nothing to do with plummeting default rates 6 to 10 years ago, it has nothing to do with rising default rates. The macro economy has little to no influence on student loan performance.

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