Susan Dynarski’s blog post in The New York Times’ The Upshot blog sheds a lot of light on what we don’t know about federal student loans, which are the vast majority of all student loans. Dynarski’s biggest frustration is the Department of Education’s lack of statistical expertise on monitoring this massive debt program, noting that the United Kingdom has separate agency to monitor its government student loans. Even the Federal Reserve Bank of New York must purchase student loan information from credit bureaus, which are private entities.
Although there’s more information out there than Dynarski might believe, there’s strong evidence that the loan program is not doing well as she and others suspect. For instance, on March 26, the Department of Education released an update on its loan servicers, the companies that manage the government’s student loans because the Department of Education isn’t in the business of doing so. The department is interested, probably at the prodding of the Consumer Financial Protection Bureau as noted in Dynarski’s article, in customer satisfaction of the servicers. A quick look at the data tells us something more important but that we’d already suspected: large numbers of student debtors are delinquent on their loans, and not-for-profit servicers are much better at keeping debtors in repayment.
Among the four for-profit servicers, the highest percentage of borrowers current on their payments was 74 percent. One servicer, Nelnet, had only a 62 percent current repayment rate. All of them had 91-270-day delinquency rates over ten percent. The not-for-profit servicers had better showings. All of them had current repayment percentages over 80 percent, and some approached 90 percent. None of them had 91-270-day delinquency rates over 6 percent. It’s clear that the not-for-profits are much better at keeping their borrowers out of delinquency. However, the department didn’t include statistics on long-term delinquency rates, which have been a growing problem as discussed in the link above.
Readers can find the Department of Education’s customer service data here. Dynarski’s post can be found here.
It’s understandable, then, that Dynarski would want another agency to analyze the government’s student loan data, but it’s unlikely to find anything pretty.
The good news, though, is that most federal loans are eligible for an income-sensitive repayment program. Moreover, disabled debtors can fairly easily show that they are entitled to an administrative discharge. Bankruptcy is possible in some circumstances, but given the procedural hurdles it’s very important to hire an experienced New York bankruptcy lawyer to handle the case.
For answers to more questions about student loans, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy lawyer Bruce Weiner for a free initial consultation.
