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  • Student Debt – What is the Actual Scenario?
  • Posted By:
  • Jamie K
  • Posted On:
  • 27-Mar-2015
  • Our government is terribly dysfunctional when it comes to handling the student loan debt that surpasses $1 trillion. A huge portfolio of delinquent and default loans are held by loan companies under our education department who are unable to provide a detailed report. Our student loan portfolio governed by the education department is failing to analyse the situation and is not allowing other agencies to do it too.

    There is not enough focus given to this situation. We must remember that student debt is not a trivial matter for our country and for individual borrowers. As compared to credit card loans, student loans are larger debts for households. If these loans go unpaid, it is directly impact the tax payers and the overall well-being of households.

    What is frightening about the situation is that most of us are unaware of the student debt reality. No one knows information about how many borrowers are delinquent and about colleges that are bogged down by debts. We are all unaware also of the number of borrowers eligible for balance forgiveness and payment caps as a part of federal debt relief.

    These are extremely important information kept from the general public. Basic questions about student debt remain unanswered by the education department. The data posted on the department’s website does not say much. In contrast, when it comes to mortgage loans, the data released are pretty clear.

    Some of the reasons behind this limited access to student debt related data could be clunky software, budgetary restrictions and legal constraints. The loan data is held by the Federal Student Aid. This is not an analysis proficient statistical office but only an operational unit of our Education Department. All loan database operations are outsourced to a small business which means no data is available for ready reference even for department staff.

    As opposed to our education department, the Internal Revenue Service and other federal departments have provided researchers with data even as privacy is optimally safeguarded. According to a past employee at the education department Thomas Weko, the issue is not legal or financial constraints but reluctance to press for action by senior political leaders and lack of will at the Federal Student Aid.

    Top, well-trained analysts are extremely eager for the data both outside the government and in the Federal Reserve and Consumer bureau. A quick solution can be found to this issue if only the education department wakes up and provides the data allowing them to work through it.

    As far as I can see, the only long term solution to this problem is to move the loan program to a new student loan authority or to an existing agency with the necessary statistical expertise from the education department as it is in UK for the past two decades.

    There is not even a chief economist at our education department and this makes it impossible for the department to skilfully analyse the hugely challenging student loan market. Improving education should be the department’s central goal and all other processes must be outsourced to another agency.







 

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