The headline for Mr. Jeffrey Dorfman’s May 10th article at Forbes blares, “Student Loan Debt Hits Record High And That’s Good.”
The economics professor at the University of Georgia then points to a study showing that college graduates, on average, earn $280,000 more than non-graduates twenty years after graduation. He goes on to say that the problem of students who have problems repaying their student loans is “small and manageable.” Dorfman, a self-described conservative, then criticizes “liberal” policy prescriptions for lowering the price of college.
First, Dorfman’s claim that the problem of students who have problems repaying their loans is “small and manageable” is outrageously false. A recent Brookings Institution report found that the default rate for 2004 students- who were only borrowing a third of what they are today- is an astonishing 40%. Even subtracting out the terrible for-profit colleges leaves a default rate of 33.4% for the “Good Schools”. The default rate for more recent students is certainly far higher than this. It is probably very conservative to estimate that well over 50% of students since 2004 have defaulted or will default on their student loans.
Moreover, at the end of 2016, there were 8.1 million people in default on the books. Off-the-books (ie “rehabilitated”) defaulters bring this total to 9.6 million people. At the end of last year, this has likely grown to about 11 million people. This is one-fourth of all borrowers, and this is growing quickly!
Also, the vast majority of the people in the various forgiveness programs such as Income Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF) are being disqualified for one reason or another. Given recent data showing that only 7.5% of the people who thought they were going to get their loans forgiven through PSLF actually will, and that as of three years ago, a whopping 57% of the people in IBR had been disqualified on just one of the grounds the Department of Education has available to it to disqualify borrowers, it would be surprising if even 15% of the people in these programs actually made it through. The rest will be left owing far more than when they entered.
Pointing to survey’s that find college graduates are higher than non-college graduates is similarly, unimpressive. One could, for example, do a similar survey, and differentiate on sailing lessons. Surely, we would likely find that those who took sailing lessons earned more (probably far more) than those who did not take sailing lessons. Does this mean everyone should rush out and sign their children up for sailing lessons? Of course not!
This sort of piece is very harmful to the public discourse. While Dorfman claims to be a conservative, he is actually providing camouflage for what has become the worst, big-government, predatory lending system that this country has ever seen. The federal government profits well over $50 Billion per year on this lending system, and in the absence of the uniform bankruptcy protections that exist for every other type of loan, the federal government is even making a profit on defaults. Not to mention: profits from this program are being used to fund the Affordable Care Act (aka “Obamacare”)! Suffice it to say: Mr. Dorfman’s claims of conservatism are hard to swallow.
Upon being confronted with the facts above about defaults and forgiveness statistics, Dorfman would not even acknowledge them. He only claimed that student borrowers at the University of Georgia leave school with only $8,000 in loans -an outrageously incorrect claim. If Mr. Dorfman would like to publicly debate this topic, and respond, this would be very helpful to the public discourse. This is a standing offer.
In the meantime, Dorfman should do his homework, and turn in his conservative card. Forbes should think twice before letting him publish such big-government propaganda.
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