What do we know about student loans? Less than you think

Despite the fact that almost 1 of 5 American adults grapple with student loan debt – a total of $ 1.5 trillion – little is known about the various often treacherous paths borrowers take as they move toward repayment. The landscape remains such a mystery as public data on student loans is limited.

This lack of transparency may seem impossible to apprehend, in particular because securities about Student ready became omnipresent during the last years. But much of the information available to researchers, policy makers and the public comes from data surveys, colleges, Nonprofit, and credit bureaus, which provide snapshots of borrowers’ experiences rather than the full story. As a result, the public is largely unaware of what student loan repayment looks like for millions of Americans.

Little is known about how borrowers move through higher education and into and out of repayments. Are students more likely to default when they attend multiple schools? How soon after repayment begins do borrowers change their repayment plans? Do borrowers who are in default fail through delinquency after delinquency, or do they make a direct attempt to default?

These questions cannot be answered with public data. The absence of these data not only hinders the collective understanding of student debt, but also allows inaccurate accounts such as the assumption that highly indebted borrowers are those most in difficulty. This could lead students to do misinformed borrowing decisions and the political decision-makers to propose ineffective reforms.

The Department of Education could fix this – and quite simply. The Federal Office for Student Aid (FSA) holds over 56 billion records on federal student loans in the National Student Loans Data System (NSLDS). Although researchers sometimes use Limited NSLDS data to provide an overview of the federal student loan portfolio, the data is never used to trace the path of students through repayment, even though all the necessary information is stored in the system. FSA May Release NSLDS Data without much effort but seems to lack the will to do so. Ultimately, he can take action from Congress to force the regular release of student-level data that can help everyone understand the state of federal loan repayment and what’s at stake if things don’t change. not.

Why is the data on student loans so poor?

The systems that house student aid data were built in a different era, before the expansion of federal education loans. As federal programs were created, new data systems emerged, forming a network of administrative data systems that house billions of aid data records on millions of students, some of which date back over 30 years.

In the meantime, other datasets have been brought together to answer policy-relevant questions. But this data suffers from three shortcomings: 1) It almost always reports highly aggregated results rather than data on individual borrowers. Therefore, it is impossible to understand how, for example, the repayment experiences of low-income students differ from those of high-income students; 2) Most of the more detailed data are published infrequently, which means that the most recent information available is almost always out of date; and 3) student loan data is almost always static and accessed at some point. They cannot be used to understand, for example, the paths taken by student borrowers between leaving school and paying off their loans in full.

Borrowers Struggle When Decision Makers Are Left Blind

With such poor public data on student loans, policymakers are more likely to base their proposals on anecdotal observations or conventional wisdom rather than research. The repayment of student loans poses significant problems that the data currently available does not address. Below are three of the many areas of student loan borrowing and loan repayment where making NSLDS data available would be invaluable to policy makers looking for ways to improve borrower repayment processes.

Information on who uses income-based repayment plans, their monthly payments, and income

  • What we know: FSA Data Center publishes information on the number of borrowers using Income-Based Repayment Plans (IDRs), which allow borrowers to pay a certain portion of their income each month towards their student loan balances.
  • What we don’t know: The published data does not say anything about the lifespan of borrowers in these plans, the balances of borrowers in these plans, the default rates of borrowers who use these plans, the amount that borrowers in these plans pay monthly, and those who use the plans. There is also no demographic data on borrowers who participate in IDR plans.
  • Why is this important: There is significant interest in reduce the number of IDR plansbecause there are several options available to borrowers and it is not known which plans work best for borrowers in distress. But the lack of data on who uses them and for how long makes it difficult to determine which reforms would benefit and do the most harm.

Data on borrowers who default, such as the number of payments they make and the deferrals they use

  • What we know: Recently published data shows that 27% of borrowers who started college in 2004 defaulted within 12 years of starting repayment. The majority of these borrowers did not graduate or obtain a certificate. The majority were also enrolled in a community or for-profit college. The data also shows that African American borrowers, in particular, have high default rates, even when they get a bachelor’s degree.
  • What we don’t know: Little is known about the paths borrowers take to default. The available data does not provide information on the number of payments borrowers make or the number of deferrals or abstentions they use before defaulting. It is also unclear how many borrowers go through periods of delinquency and never default, and the available data gives no insight into current loan manager default rates.
  • Why is this important: Policymakers cannot expect to improve student loan repayment processes if they use the best assumptions or worse, baseless assumptions about why borrowers do not repay their debt. A better understanding of how borrowers process repayments, including in the event of default and in the event of default, could indicate how best to smooth out sticking points for vulnerable students.

An overview of repayment pathways, including the time it takes borrowers to repay their loans

  • What we know: The standard repayment plan, which offers borrowers a fixed monthly payment over a 10-year period, is the most common path to repayment. Full refund, however, probably takes longer than that, since 70% of borrowers use a stay or forbearance at some point during the refund process.
  • What we don’t know: The available data does not show how long it takes borrowers to fully repay their loans. Re-enrollment, defaults, deferrals, defaults, and underwriting other repayment plans can all cause borrowers to pay for a longer period, but it is not known how long these events prolong the loan period. repayment, how often borrowers each experience it and how much more they pay in the long run.
  • Why is this important: With more and better information on repayment trajectories, policymakers could better understand how various repayment tools are serving borrowers’ circumstances and whether there are appropriate options for all types of borrowers. Additionally, it would allow policymakers to better understand whether current and proposed accountability measures – such as cohort default rates and repayment rates – are valid benchmarks.

FSA already has better data, but congressional push needed to make it available

The FSA periodically publishes summary tables using NSLDS data, proving that the dataset is capable of answering important questions. But these tables cannot be combined with each other, which leaves little room for drawing more precise conclusions.

The FSA has developed tools to allow more flexible internal analyzes of NSLDS data. In 2004, he built the Enterprise Data Warehouse and Analytics, a system which pulls a representative sample of NSLDS records to allow new perspectives on borrowing and repayments. However, the FSA does not make this data available to the research community or the public, even though federal law does not prevent it from doing so.

If the FSA regularly published a representative sample of NSLDS, it would provide researchers, policy makers and the public with reliable and up-to-date data on borrowers’ journeys through repayment. And if this data were compared with data from other federal agencies, such as the Treasury Department, the Department of Health and Human Services, and the Department of Defense, there would be more comprehensive information on borrower income. students, relying on federal resources. public benefits tested, or how the military fare on reimbursement.

Pressure from US Secretary of Education Betsy DeVos or Congress could push the FSA to release this data. The former secretaries were hesitant to push FSA, however, so it seems unlikely that Secretary DeVos will change course. And although Congress has historically been reluctant to call for more data – and even actively banned a national student-level data system in 2008 – there was recent bipartisan efforts remove this ban and improve the collection and publication of federal data.

Congress does not need stand-alone legislation to make a sample of NSLDS available to the public. He could add the provision to a budget bill, ensuring continued availability of data in the future. This would provide real value to Congress and alleviate some of the Department of Education’s analytical burden, which would be a valuable proposition for anyone invested in improving borrower outcomes.

Colleen Campbell is Associate Director of Post-Secondary Education at the Center for American Progress.

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