WSJ: Grad Debts That Can’t Be Repaid … Can Be?

Josh Mitchell of The Wall Street Journal does some good reporting in, “Grad-School Loan Binge Fans Debt Worries.” There are, as one should expect, some errors.

One, after interviewing a handful of professionals with high incomes and unpayable debts, he writes:

But a number of recent studies show the benefits [of IBR] are largely going to people who need them the least—doctors and many lawyers who will end up making six-figure salaries. The benefits are less meaningful for undergraduate borrowers, because their average debt burden is roughly $30,000 and income-based repayment plans aren’t likely to lower their bills by much.

This is not true. There is no study that estimates the number of IBR freeloaders out there, otherwise the WSJ would’ve named it and cited the statistic. At best all we have is fear-mongering by the New America Foundation. Nor is there a study that estimates the total number of Grad PLUS loan debtors by course of study, median income, and proportion on an income-sensitive repayment plan. Such a study would probably find that the handful of people gaming the system are outweighed by professionals who aren’t earning much. This is the point of IBR.


Of the 5,686 hospitals in the U.S., 73% are nonprofits or government owned, according to the American Hospital Association, thus qualifying their employees to have loan balances forgiven after 10 years.

Do we have freeloading doctors? Response: No! It’s not their fault there are so few for-profit hospitals. If you want them to pay, charge them less. (By the way, one reason I like this article is that it doesn’t obsess over the handful of law grads who have spectacular earnings coming out of law school; it’s nice to beat up on the M.D.s for a change.)

I’ll close:

The collection of incentives—passed in separate measures over several years—weren’t intended to work together to help so many grad borrowers.

Very true, but the issue is what the harm is and where it’s coming from. IBR and its like are not the cause, Grad PLUS loans are. Without IBR, there would’ve been widespread graduate debtor defaults (or at best hardship deferments). This is how the WSJ can find real people who can’t repay their loans without IBR but then say there are studies somewhere out there finding that debtors are making cash sacks.

Or, to butcher Michael Hudson: Debts that can’t be repaid, can be.


  1. Jason Delisle (NAF) is fear mongering. Jason Delisle also is essentially perpetrating a fraud of the highest magnitude when he uses a bastardized, wholly wrong, and deceptive version of “fair value accounting” to make the claim that the Government is losing money on the federal student lending program. He should not be believed, and his work should not be taken seriously.

    As for the current analysis, Jason is pointing at boogeymen that completely ignore the FACT that the IBR and PSLF programs are being administered in such a way by the Department of Education as to kick as many people out of the program as possible.

    Our prediction that only a small fraction of the people signing up for these programs will actually make it through to the end proved absolutely correct in April when Kelly Field at the Chronicle of Higher Education found that 60% of IBR borrowers have already been kicked out of the program.

    These programs are cruel jokes on the citizenry. As long as bankruptcy protections (and statutes of limitations) are gone from student loans, and the government is actually profiting on defaults, this is precisely what we can expect from the Department of Education, which has proven time and again that it puts it’s institutional fiscal interests ahead of the public interest.

    This is indefensible, intolerable, and cannot stand.



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