Ben Miller
Defaulting on student loans in America

Will Brehm  1:32
Ben Miller, welcome to FreshEd.

Ben Miller  1:34
Hi there, Will. Thanks for having me.

Will Brehm  1:35
So how much debt is the average American student in?

Ben Miller  1:38
This number can vary a little bit depending upon whether or not a student gets a bachelor’s degree, just an associate degree, if they graduate or not. I like to think about this in terms of students who graduate. And for them, it’s about $22,000. But for someone who say gets a bachelor’s degree, it’s a little bit higher, more like about $30,000. And for someone who maybe gets only an associate or a certificate, it can be a little bit lower, more on the order of the high teens, low 20s.

Will Brehm  2:11
And what do we know about this student debt? Are there gender and socioeconomic and racial differences when it comes to the types of students that have this debt?

Ben Miller  2:21
We know a couple of different things. One is, we talk about the typical college student, the person we have in our minds is the 18 year old who goes straight from high school, stays in a dorm on campus, things like that. And that person really is not the typical student loan borrower. In general, a lot of the people borrowing student loans tend to be older students. So they may have actually worked for a couple of years before they went to college, they’re much more likely to be people of color, and as you might expect, they’re much more likely to be low income. Because one of the reasons why people have to turn to a student loan is because they do not have the money to just pay for tuition up front. And so when we look at the numbers and things like that, we tend to see is there’s a pretty big difference in terms of the fact that, say, an African American student is much more likely to borrow compared to, say, a white student or an Asian student or something like that. And so, given that we’ve got over 43 million people with a federal student loan, certainly it cuts across all races, all incomes. We are talking about one out of roughly every six adult Americans, but if you were to say who is more likely to have student loans, it is going to be people of color, it is going to be lower income people, and it’s going to be older students.

Will Brehm  3:41
And are borrowers taking out money to go to community colleges, state colleges, private colleges? What sort of institutions are student borrowers typically attending?

Ben Miller  3:55
Again, we have thousands and thousands of colleges in America. They are using student loans at a really wide variety. But by and large, the most common places where we see student loans are going to be at your public four year colleges. So whether that is your University of California Berkeley’s, your University of Virginia’s, your University of Arkansas’s, etc. And then you see it also a fair amount at private for profit colleges, which are places like the University of Phoenix, DeVry, things like that. Interestingly, even though community colleges represent a very large share of students, they have a much, much smaller share of borrowing, mostly because the prices there are so low and so affordable that a lot of students don’t have to borrow to go there. So we have a little bit of a difference between where students are going and where students are borrowing.

Will Brehm  4:51
And has this picture that you’ve just sort of painted of the typical borrower been consistent over the past, say 10 years?

Ben Miller  5:01
So, really what we’ve seen is a big change following the great recession. So, you go back to say 2004, and what you see is a little over half the students in college, about 53%, had to borrow. And of those who finish something of any type – bachelor’s, associate, etc – the average amount they owed was $19,800. You fast-forward to say 2012 or 2016, a couple years after the recession or many years past that, and you are looking at about 62% of people borrowing with a typical debt load more like $24,600 or so. And I should say, these numbers here are all adjusted for inflation. So in real terms, we’re looking at borrowers who graduate taking on about 5,000 more dollars in their debt load, and being about eight percentage points or so more likely to borrow. And that’s a little bit the troubling thing, as basically at this point, we’re several years past the end of the recession, and you would hope that we would have seen a little bit more of return to where things were before the recession. And we’re not really seeing that, it really has sort of jumped up a good bit and largely stayed there.

Will Brehm  6:17
And why did it jump up in the numbers that you earlier said?

Ben Miller  6:21
I think a couple of things happened. One is one of the main things that determines whether or not people borrow and how much they borrow is the price of their college. And one of the things that really affects how much someone pays for college is, if they go to a public college, how much the state subsidizes it. So it used to be that states paid the lion’s share of the cost of actually educating someone so prices were relatively low and affordable. And what we’ve really seen after the recession is that states cut basically billions of dollars in funding for public higher education. And the result of that, essentially, is that a big chunk of those cuts got passed on to students in the form of higher tuition which they then borrowed to pay for. The other thing that happened at the same time is we saw really massive increases in the number of students going to what’s called “private for profit colleges” – again, University of Phoenix’s of the world. And those colleges, because they don’t get any state subsidies by and large, and because they want to make a profit on top of whatever it costs to educate people, tend to just have much much higher prices than equivalent programs elsewhere. And they tend to enroll people who have even less money to help pay for college. And you combine those two factors, and you get just a lot of debt.

Will Brehm  7:47
So states cutting funding to higher education passing on those expenses to students, and the rise of for profit universities, those are the two big reasons, the differences say between 2004 and 2012 or 2016.

Ben Miller  8:03
That’s right. And now you say that, I do forget that I should mention that obviously the other thing that happened was we had a lot of families just have a lot less money. And so that’s also going to drive it too; if your price goes up, and you also don’t have as much resources to rely on, that, too, is going to affect your likelihood of borrowing. You know, the other big question that we really don’t know here is, how much of some of the borrowing increase we’re seeing is a function of families not be able to pay for college by using things like home equity loans in the past. It is highly likely that a lot of middle income families may have been drawing from their home equity to help pay for college. And obviously, when home prices really took a dive during the recession, that became a financial tool they couldn’t really tap anymore. But home prices have recovered a little bit and the borrowing is still really up there, so that part’s a little hard to say.

Will Brehm  8:55
Has there also been an increase in enrollment into universities post global recession?

Ben Miller  9:00
Yes. We saw a big jump, especially right at the peak of the recession, because what happened is for a lot of folks who in the past may have said, “I’m not going to go to college, I’m going to get a job.” Well, there weren’t any jobs to go get. So they went to college instead. And so, in particular, in community colleges, and in private for profit colleges, we saw a really big increase in enrollment. And when you zoom out and think about this, in terms of not the average amount each borrower takes on, but just how many borrowers there are and how much money they’re taking on, that’s where you really see the enrollment effects. The one thing I will say on that is, they’ve since subsided a little bit. As the economy has gotten better, we have seen more people opt to go work rather than go into college. And also, just from a demographic standpoint, we had a little bit of an echo of the baby boom going on right around the recession where we just had a lot more prime college aged people in the population, and now as that echo of the baby boom has faded a little bit, just the number of people in the core college demographic has also slightly shrunk.

Will Brehm  10:11
I want to turn to the loan providers. Who’s giving these loans?

Ben Miller  10:15
These days, the vast majority of loans are coming directly from the federal government. It’s probably around 90%, or maybe a little bit higher are what we call “federal student loans”, with the other 10 or so percent called “private student loans”. The one that makes it a little bit funny or a little bit confusing is the loan comes directly from the government, but the way it actually works is basically colleges get approved to participate in the loan program and then any student they enroll who is eligible can get a loan. So it becomes a little bit of a strange thing, because it’s not like, say, home mortgages where there’s individual calls being made, and the government sets certain terms that they’re going to approve for loans something like that. It’s much more the school gets in the aid program, and then anyone who comes in the school’s door can get the loan.

Will Brehm  11:13
So a typical borrower, are they submitting an application to the federal government or through their school?

Ben Miller  11:22
They would submit to the federal government. They fill out something called the Free Application for Federal Student Aid. And then they sign a document that’s called a Master Promissory Note that outlines the terms and conditions of the loans, the fact they need to repay it, etc. But then the money itself actually flows from the government to the school. So for example, if the student is just going to use the loan directly to pay for their tuition, they’re not going to ever actually touch the money, it’s just going to go straight to this the school. If they have a loan in excess of what their tuition is, so let’s say their tuition is $4,000 and they take out a $5,000 loan, then the school actually cuts the check for that $1,000 difference.

Will Brehm  12:03
And sends it to the student?

Ben Miller  12:05
And sends it to the student. That’s right, yes.

Will Brehm  12:06
And then when the student repays loans, are they repaying the school? Are they repaying the Department of Education? How does that work?

Ben Miller  12:17
They repay the Department of Education. But again, it’s sort of a funny thing where the money is federal money, but what the Department of Education actually does is it contracts with a series of private companies to do what’s called “student loan servicing”. So basically, if a borrower has a problem with their loans, or they have a question, or they need advice, when they pick up the phone and call somebody, the person who answers the phone on the other line is essentially a contractor for the federal government, not an actual federal employee.

Will Brehm  12:50
Okay, so I think I got the sort of mechanics here. Now what happens if, for instance, I can’t repay or make a payment on my student loans? Do I tell the contractor who’s servicing the loan for the federal government? Do I tell my school? Do I tell the Department of Education? What would I do?

Ben Miller  13:09
Let’s presume that you want to do something about it. Because realistically, what happens with a lot of people is they can’t pay, they don’t say anything, and then after 270 days, they default on it. But for people who want to pay and just can’t, or I should rephrase it as who can’t pay but don’t want to default and want to do something, what they would typically do is either pick up the phone and call the servicer, or they might try and go on to studentloans.gov and see what they can do through that website. And you know, basically, when you find yourself in that situation, there’s a couple things you can do. One is, there are certain tools the Department of Education offers called deferments or forbearances that essentially allow borrowers to stop making payments without the risk that the loan will default. And some of these things totally make sense and are reasonable to do. So if you graduate from your undergraduate program, you decide you want to go to graduate school, you can get what’s called an “in school deferment”. So essentially, the government’s not going to make you pay your loans while you’re back in school again. Or if you’re in the military and you go into active duty, they’re not gonna make you pay while you’re doing that. For people who are really struggling, what they can do is get other kinds of deferments or forbearances where some of them could be as simple as you just call the servicer and say, “Hey, I’m struggling, I need help.” And they just say, “Okay, just don’t pay us for a year.” And that’s called a forbearance. And the downside to that is one, you don’t make any progress paying down your loan, and two, the interest on your loan keeps growing. So it fixes your problem right away, but it doesn’t help you at all over the long run. And so the thing we’ve done or not “we”, but the federal government has done to try and deal with that long run question, is create a series of options called “income driven repayment”. And what those do is basically say, “Okay, if your loan payment is too much compared to your income, we’ll cap what you owe at a set share of your income.” So basically, what the typical line is, you’ll never pay more than what’s known as 10% of your discretionary income.  So basically, the amount of money you make with an allowance to recognize that you have to pay for food, you have to pay for housing, etc. And so what that means is, for some borrowers who are really struggling, they may not actually have to make a payment because it may be that they either don’t have any discretionary income, or 10% of their discretionary income is some tiny, tiny, tiny dollar amount. And so for them, they don’t default. And they actually start to make progress toward getting loan forgiveness, because the sort of final thing we offer here is, if you use one of these income driven payment plans for 20 years, or 10 years if you’re in public service, the government forgives whatever you have left at the end that period. So we have we have a little bit of a strange circumstance where a struggling borrower, there’s sort of the easy fix for them, which is to stick them on one of these forbearances, and then the thing that’s probably good for them over the long run, which is to tie their payments to their income, and help them work their way toward eventual forgiveness. And I think what you see sometimes is, depending upon who picks up the phone and what they want to do, sometimes the borrower gets put on the thing that’s good for them in the long run and sometimes they get that quick fix that probably doesn’t really help them.

Will Brehm  16:37
Why wouldn’t all students do the income driven repayment scheme?

Ben Miller  16:44
I think there’s a couple reasons. One is, some people really just want to get rid of these loans as fast as possible. And so they want to pay faster; they don’t want to pay on, say, a 20 year time horizon. What I would often tell people is, think about this: just go on that plan, and you can always pay more; there’s no penalty for prepayment. The other issue is, it’s just a little bit clunky to use. You’d have to submit your tax records, and you have to do it each and every year, which can be a real pain. One of things we hear from servicers and students alike is paperwork gets lost, the rules are confusing, it’s hard to do it all digitally. So in some cases you may be even faxing stuff. And I will say, as someone who considers himself relatively tech literate, I don’t think I’ve ever correctly sent a fax on the first try. So I imagine there’s a lot of people in the same boat there. And the other thing is, some of these plans, the way they work is, you never pay more than 10% of your income. But if you’re really well to do, it’s possible that 10% of your income is actually more than what you’d pay on one of the more typical plans. And so people may not want to be forced to pay even more than they might otherwise would.

Will Brehm  17:56
Are there any incentives for the service provider to prefer a particular repayment scheme over others?

Ben Miller  18:03
Not really. Basically, the way this whole thing works is the federal government actually doesn’t pay very much to the servicers for any given student. A student who is current on their loans generates about $2.85 a month for a student loan servicer. One who goes really delinquent might generate a dollar, 50 cents, something like that – a lot less. But the problem is, again, there’s a not insignificant difference between $2.85 and $0.50, but it’s not a huge amount. And so the servicing game becomes all about volume – you basically want as many accounts as you can possibly have. And so, when servicers get judged to figure out who’s gonna get new accounts, the government does look at things like what share of the borrowers that you work with are current on their loans, what share are really delinquent or in default, things like that. But for a lot of servicers, the trick is to be good enough. And for a lot of borrowers who are really struggling, it may not be worth the cost to try and work and get them into one of these income driven repayment plans, versus just sticking them on the voluntary forbearance, saying, “All right, look, I’m going to get a buck or so less than I otherwise would, but it’s going to cost me basically nothing to do it. And as long as I don’t do it too often, I’ll be okay.” So I think that the real challenge is, it’s not just that we don’t incentivize using income driven repayment enough, but the way we pay them so little, it can make it such that they’re going to very easily say it’s just not worth the money it would cost to really help a borrower.

Will Brehm  19:48
So the political economy here, the logic behind these service providers for student loans, is volume. So in a sense, they also contribute to the rising numbers of the student debtors. Is that correct?

Ben Miller  20:06
I wouldn’t quite go that far. They definitely play a role in how successful borrowers are when they repay their loans. But I think the challenge is they both matter a lot in many ways, and not necessarily in other ways. So for instance, I think one of the problems we have is, for some borrowers, the issue is they’ve got a loan and they either didn’t finish college, or they got a loan from a place that’s really not very good. And you could have the best student loan servicing in the world and maybe those borrowers are slightly more successful than they would be. But we still have a basic problem of essentially, they’ve got debt that their income’s probably not going to let them be able to repay all that easily. I think where you probably see more issues around the servicing is folks who probably can pay, like they have the money and maybe they’re given either bad advice or put in the wrong plans, or if they pay extra each month, it doesn’t get applied to their loans properly, sort of things like that. So they both do matter a lot but one thing I always caution people is that we shouldn’t assume that if we just fix servicing we’ll just solve all these problems, because the baseline issue is what did people even borrow for, and what did they get when they borrowed in the first place?

Will Brehm  21:29
Yes, and that seems like a whole another conversation we could have. What I want to do is actually instead of talking about the people that are able to repay loans using different schemes, I’d like to talk about the students who can’t actually make the repayments. I guess they would be delinquent, or eventually default. Could you tell us what the difference is between those who are delinquent in their student repayments and the students who end up being in default?

Ben Miller  22:00
Sure. So basically the way it works is, in order to default on a federal student loan, you have to go 270 days without making your required payment. So basically what that means is, let’s say you don’t pay for a couple months, you start going delinquent. And typically, we start to think about a significant delinquency as being about 90 days late. So you skipped three months. We don’t really kick it any consequences, though, until that 270 days, where after that point, you actually are formally deemed to be in default, you start working with actually a whole new set of companies. And then usually about day 360 is when they might start doing things like garnishing your wages or taking your tax refund and things like that. The way I think about it is those folks who are severely delinquent are probably pretty likely to be future defaulters but they just haven’t gotten there yet. Because 270 days is roughly nine months, so it takes a little while to get there.

Will Brehm  23:12
Is defaulting on your student loans similar to defaulting on your house mortgage?

Ben Miller  23:18
Yes, and no. In one sense, it’s similar in the sense that it’s pretty bad. And the consequences to your credit are fairly severe. In some ways, it’s less bad and in some ways, it’s worse. It’s less bad in the sense of a student loan is not backed by a fiscal asset. So if you default on your mortgage, they will take your house. If you default in your auto loan, they’ll take your car. Well, they can’t come and repossess your diploma. And for over half of defaulters, they don’t even have a diploma because they didn’t graduate. So there’s nothing that gets physically taken from you that way. On the other hand, because it’s a federal loan, there’s very strong powers to collect on that debt. The government can garnish your wages. It can take a tax refund. If you’re old enough and get Social Security, they can take a portion of your Social Security. They can also go after you in court if they think that you have the means to pay and you’re just not. And unlike most other kinds of debt, like credit card debt and things like that, you can’t really get rid of it in bankruptcy. It’s not 100% impossible, but it’s like 99.9% impossible. So it is this funny thing, right, where on the one hand, the immediate consequences are not as bad because they don’t come and take something. But you don’t really have a way to ever get rid of the debt once you have it unless you pay it off or get it forgiven.

Will Brehm  24:55
What happens if you die? Does it get passed on to your next of kin, or does it disappear?

Ben Miller  25:01
That is the one place where we will just wipe it out. That’s true of federal loans; it is not always true of private loans. In fact, there’s been some cases that are really heartbreaking where you’ve had, say, a parent cosign a loan with a student, the student passes away, and sometimes the lender will actually make the loan essentially come due in its entirety right away. Federal student loans have a protection that does not allow for that. So we don’t transfer to generations. If a parent borrows on behalf of a child and the parent passes away, it gets wiped out. So it does stop at death’s doorstep.

Will Brehm  25:41
And how many borrowers are in default? Do we know this number?

Ben Miller  25:45
Yes. So right now, I think it’s between about seven and eight million. I forget the exact figure, and part of the way they report it makes it hard to get the exact count. But you know it’s a lot, and it grows. We have about a million borrowers who default every year on a federal student loan. Those are people who could have ended repayment and at any point in time over over many, many years, but we’re talking about a not insignificant number of Americans here.

Will Brehm  26:13
And you said there was slight problems with how it’s reported. How is this number reported?

Ben Miller  26:20
The basic issue, to make a long and fairly wonky story short, is the Department of Education has something called the Federal Student Aid Data Center, where they post a bunch of stats about the federal student loan portfolio. And one thing that makes it a little bit hard is we used to have two types of federal student loans in this country. One was essentially a bank-based system where loans were made directly by the banks and the government essentially gave the banks a guarantee that if the loan defaulted, they wouldn’t lose very much money. And then the other system was one where the Department of Education just issued the loan directly itself. In 2010, we moved over and now only loans come from the Department of Education, or only federal loans really. But because we still have this older bank-based system for borrowers who borrowed years and years ago, the reporting across those two systems isn’t always consistent. So we know how many people are in default in one system, how many people are in default in the other, but we don’t always know how many might be in both at the same time.

Will Brehm  27:26
Is there ever a case where a student who takes a deferral or a forbearance – I guess a forbearance would be the bigger issue here – they take a forbearance and then aren’t counted as someone who would eventually default? Let’s say a student takes a forbearance for two years today and then starting in 2020 ends up defaulting but then isn’t counted in the statistics on who defaults.

Ben Miller  27:55
Basically, we think about the defaults in two ways. So one is this sort of, “What is the whole portfolio doing? How many defaulters do we have?” And then the other way we think about it is, “Are we having too many colleges where we have a higher rate of default than we’d like?” And it’s that second issue where deferments and forbearances and things like that can start to get problematic. Essentially, the way it works is: Congress passed a law in the 90s saying, “If a college has too many students defaulting on a loan for too many years in a row, they lose access to federal financial aid.” The idea being that we don’t want to keep giving loans to places where people clearly aren’t able to repay them. The challenge is though, we only track how many borrowers from a given college are defaulting for three years of repayment. So what that means is at the end of the third year in repayment, we stop looking for accountability purposes. So anyone who defaults after that third year just doesn’t show up in any of the numbers that Department of Education publishes to talk about how many colleges might have high default rates or things like that.

Will Brehm  29:08
So students who default after the third year wouldn’t be accounted for when the federal government is deciding which universities are eligible for federal student loans.

Ben Miller  29:20
That’s exactly right. So the whole game becomes about how can you push any possible student loan defaults just past that magic three year mark. Because if a default happens at three years one day, it doesn’t get counted.

Will Brehm  29:36
Obviously that’s a strange, perverse incentive that exists in this economy of student debt. Who are the bad actors? Is it universities? Is it the loan servicers? Who’s pushing students past that three year mark?

Ben Miller  29:52
What we see is that there’s a lot of colleges, particularly private for profit ones, that seem to be really pushing people into default in later years so they aren’t tracked for accountability purposes. This is what we see in the op-ed – that of students who default between years three and five in repayment, the majority went to a private for profit college. And that’s pretty striking, because these schools are only about 10% of students and about 23, 27% of borrowers. So, again, roughly a quarter of borrowers, more than half of defaulters in years three through five. And we don’t know the exact mechanisms they use, but most likely what’s going on is they essentially employ a set of debt management consultants who do things like call the borrowers and say, “Hey, I’ll give you a $25 gift card, if you go into a forbearance.” Or, “Hey, just sign this thing. We’ll take care of your loans, don’t worry about it.” And the reason why they do that all is again, it’s all about three years into repayment. And so if you just do the basic math, well okay, it takes 270 days to default on a federal student loan. So that means that three year window is really more like, two years and three months. So all you have to do is get them into forbearance for about two years, and suddenly your problems just go away. And I should be clear, it’s not 100% for profit colleges. We do see defaults rise in other sectors, but when I got these data that allowed me to see what the five year picture was, not just the three year picture, and you plot it by the type of college. You look at, say, community colleges, which enroll a lot of low income students, and they have a line that sort of looks like a roughly straight line. Basically each year grows by a couple of percentage points, because we just see slightly more default. When you look at for profits, there’s just this amazing kink in the line right at year three, where from year three to four, the default rate jumps by about 45%, or about seven percentage points. And so the result of that is at year three, the default rate for profit colleges is about 15% and by year five, the default rate is about 25%. It’s also telling when you compare this between for profits and community colleges, where community colleges don’t have the resources to do this default rate manipulation work. So at three years, when the government’s officially looking, the default rate for community colleges is just a little bit above that of for profits. By year five, the for profit rate is higher because they’ve essentially just pushed all of those defaults into those later years.

Will Brehm  32:52
It’s interesting, during the global financial crisis there was lots of talk about predatory lending – giving mortgages to people who had no jobs and no income – but in this case, it sounds like it’s more predatory repayment or something like that. It’s not necessarily the lending that is necessarily predatory, but it’s the repayment options that could become predatory.

Ben Miller  33:18
Yes, I would say in these cases, not necessarily the way they’re repaid so much as what they were borrowed for. That’s the funny thing, right. So if you took a federal student loan, and used it to go to your local public college, it’s probably a pretty decent loan. The interest rate these days is about 4%. You can pay back based upon your income. If you pass away, the loan gets forgiven. If you have a medical issue, you don’t have to pay. Things like that that aren’t bad. But you take that exact same loan and you offer it for say, a program that is going to train you to be a medical assistant, which pays say $18,000 a year, and they make you borrow $15,000, for it. And suddenly, that loan is super unaffordable and it is sort of predatory, because the thing you borrowed for wasn’t worth the money. And so the way I think about this is that the real issue is essentially we’re allowing some colleges that just do not provide a high enough quality training for students to really succeed after they enter the workforce to be just handing out billions and billions of dollars in federal student loans.

Will Brehm  34:31
What do you think needs to be done? Or, alternatively, what is the Trump administration doing to address some of these issues?

Ben Miller  34:39
Sure. So you know, I think that unfortunately, there’s there’s a big divide between what needs to be done and what is being done. On the “needs to be done” front, I think one thing is we need much stronger measures in place to identify and hold schools accountable if they have loan problems. It’s pretty clear that the combination of only looking at default as the only measure of loan results, and only looking at the results for three years, just makes the whole system way too prone to gaming. We only have like ten colleges a year that trip up these default rate calculations in such a way that they might lose access to aid. They produce about 1,500 borrowers total out of five million in the cohort, so it’s basically nobody. I think that that’s a big part. The other thing I would say is, part of where we have student loan issues is that, particularly at public colleges, we have not done enough to keep up on affordability. And the result there is we really need to find a way to restore the promise in this country that if you are a low income student, you will get either a low enough price or enough grant aid such that you’re not going to have to borrow to go to college. I think we just are forcing a lot of folks who are very low income to borrow when the answer for them really should be grant aid. Now the challenge is, the Trump administration is going in the exact opposite direction. One of the things they’re in the middle of doing right now is actually undoing a bunch of regulations that were created during the Obama administration to try and stop some of the bad behavior at colleges that have a lot of really acute loan problems. So what they’re doing is, by getting rid of these regulations, we’re actually ending up spending more money at places with really pretty lousy results. One regulation in particular, the Department of Education itself, so the very entity getting rid of it, estimates that undoing this regulation alone is going to cost taxpayers $5 billion in the next ten years. And basically, the reason why it’s going to is we had this rule in place that said we’re not going to lend at career training programs where the graduates have to pay too much of their income to cover their student loans. The idea being that if your student loans are too much of a share of your income, you’re not gonna be able to pay it, you might default, you might go delinquent, or just something bad might happen. So you know, they want to sort of open up the floodgates of federal aid back to a bunch of places that we just know mathematically are a bad deal for students and for taxpayers. The second issue is they’ve been proposing to cut other forms of federal financial aid. So they want to cut some grant programs that are not the Pell grant, which is sort of the core one that that helps low income students. They want to get rid of certain options for loan forgiveness, and things like that that will just make either it harder to pay for college upfront, or will take away some of the safety net we’ve cobbled together for struggling borrowers once they get to loan repayment. And I worry a lot about what happens when you combine those activities, and then we get another recession where states might cut their funding again and tuition keeps rising.

Will Brehm  38:11
So do you expect more defaulting in the future?

Ben Miller  38:16
I don’t see anything that’s going to dramatically change this. We may see some reductions just because the economy has gotten a little bit better and the number of students in for profit colleges in particular has fallen a good bit. But the real challenge is, I don’t know that we’re going to know for sure. Because the data I was able to get for the op-ed are great, but they’re one snapshot in time and the Department of Ed doesn’t have a regular practice of releasing these longer term default rates at the school level. So in a couple of weeks, we’re probably going to see new student loan default numbers for the most recent cohort we track. They probably will go down a little bit from the year before, be close to like roughly what they were. But I don’t have a lot of confidence that whatever we’re going to see is going to give us close to the whole story of what’s probably going on here.

Will Brehm  39:10
Well, Ben Miller, thank you so much for joining FreshEd. It really was a pleasure to talk today.

Ben Miller  39:14
Thank you. It was great talking to you too.

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