US Government Caught Massively Fabricating Student Loan Default Data

Tyler Durden's picture

Ever since 2012 we have warned that one of the biggest threats arising from the US student loan bubble - which is no longer disputed by anyone except perhaps members of the outgoing administration - is not that it is soaring at an unprecedented pace, that's obvious for anyone with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government - either on purpose or due to honest miscalculation - was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality.

An the WSJ reported overnight "many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed."

The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed.

A spokeswoman for the Education Department said that the problem resulted from a "technical programming error."

And so, the infamous "glitch" strikes again.

How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own "fake data."

According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

As the WSJ adds, this isn’t the first time data problems have affected the Education Department: a recent government report criticized how the department tracks information including the budgetary implications of student loan forgiveness.  “This is a quality control issue with a Department of Education that has been facing criticism already for other data issues,” Robert Kelchen, an assistant professor of higher education at Seton Hall University.  The department “needs to be regularly audited so these issues can be discovered sooner.”

There is another interpretation: as we reported yesterday, when we revealed that a Chinese province admitted it had fabricated fiscal data for the period 2011-2014, the reason the data were made up "because officials wanted to advance their careers." One can imagine that the career pressure for those government workers who would report, and be held accountable, for revealing the true picture of America's disastrous student loan bubble, would be likewise staggering.

* * *

Going back to the report findings, the student loan repayment rates were originally released in 2015 as part of the Obama administration’s College Scorecard, which followed an aborted attempt to rate colleges and tie federal funds to those ratings.

At the time, the Journal reported that at 347 colleges and vocational schools, more than half of students had defaulted or failed to pay down their debt within seven years. Those figures were based on students were supposed to start repaying loans in 2006 and 2007.  In September, the Department released data tracking students who should have begun repayment in 2007 and 2008, and that number rose to 477. But with the updated number released last week, that number grew to 1,029. Worse, no college saw its repayment rate improve under the revision, and some schools saw their seven-year repayment rates fall by as much as 29%.

The worst offender was the University of Memphis which had one of the largest drops in its repayment rate following the recalculation. Previously, the Department said that 67% of its students were repaying loans within seven years of entering the repayment period. That number fell to 47% after the recalculation.

The University was not happy. In a statement, the school said it “was not contacted by or made aware of the data changes” from the Education department.  “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data,” the statement said.

The far more dire implications, however, are for broader student loan market, because if the latest unfabricated data suggesting that loan delinquencies are rapidly rising toward 50% across most of America's colleges, then the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

 

Apply default rates of 40-50% to this number, and the bill to the US taxpayer for the next mass bailout starts taking shape.

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NoWayJose's picture

You cannot take a poor person, send them to college with loans, and have them major in African American studies or Women's Studies or Philosophy or Social Justice - and EVER expect them to repay the loans.

Volaille de Bresse's picture

"You cannot take a poor person, send them to college with loans, and have them major in African American studies or Women's Studies or Philosophy or Social Justice - and EVER expect them to repay the loans"

 

Unless you become a teacher yerself and you sprout he same BS you were "taught" to young naive ears...

NoDebt's picture

"And people mock China for its own "fake data.""

We still can't hold a candle to China when it comes to cooking the books.  But we're catching up fast.

I'll also add, this is only the FIRST ROACH to crawl out from under the Obama "everything is awesome because of me" rug.  There will be others.  Zillions of them.

 

American Gorbachev's picture

i reckon the BLS will start 'telling the truth' now too

question is 'gradually, or all at once' ???

 

Ghost of PartysOver's picture

Very OT:

New website in Britian tha is going after the establishment media, pols and globalist.  This is sure to get their panties all bunched up.

http://www.westmonster.com/

Supposedly modeled after Drudge.  Yep, I already boommarked it.

froze25's picture

You mean a degree in "Lesbians of Color in modern America" won't get a person a well paying job that can be used to repay the debt for that super duper useful knowledge?

Chris Dakota's picture
Chris Dakota (not verified) froze25 Jan 19, 2017 1:05 PM

Why they voted for Bern...wipeoutmyloans.com

Syrin's picture

I nver thought I would see the day when someone took out $250,000 worth of debt to get a degree in safe spacing.

Haus-Targaryen's picture

Student loan blanket forgiveness in the next 4 years. 

 

Come the next financial crisis, this number approaches 100% at which point, well, there isn't a point anymore. 

I think they'll do a "student loan for home loan swap" where you can swap your student loan into a home loan (because the .gov will have massive inventories of homes needing new owners) and immediately start repayments on that to prevent the housing bubble from popping. 

The student loan bubble and housing bubble will become mutually exclusive.  Eventually .gov will have to choose which one to kill off. 

Student loans: $1.4 trillion

Home loans: 14 trillion

You do the math ...

bamawatson's picture

every .gov involved should be immediately terminated;
or at least fired
#BureaucratLivesDONTmatter

xythras's picture
xythras (not verified) bamawatson Jan 19, 2017 2:27 PM

Gorge Soros teams up with MasterCard to finance Migrants

http://dailywesterner.com/news/2017-01-19/soros-teams-up-with-mastercard...

BOYCOTT MASTERCARD !

Antifaschistische's picture

it's really quite simple.

eliminate the program...but if you turn the dial back a couple of notches,

...make student loan eligibility DIRECTLY tied to the job placement of each individual field of study.

Example:

1.  If a particularly good welding school in Houston places 80% of their graduates in welding and they have a 90% pay-off rate.   Then...allow up to 80% tuition loans for that specific program.

2.  If a University only places 20% of their "Voice" Majors (i.e. America's Got Talent wannabe's) into the "voice" field (whatever that would be) then they only get a maximum of 20% tuition loans.

This will force the institutions to actually vet their applicants and filter for the most qualified "voices", welders, accountants, doctors, engineers, etc..  OR..you can just work and pay cash for your ED.

It's not complicated

11b40's picture

Killing off the program is the correct answer.  Let the private lenders take the risks, then watch tuition rates drop like a rock along with the number of college students.  Suddenly, there would be lots of on-line college opportunities at a fraction of the costs.  The college campus of today is more like a Country Club than a school, and it is only made possible by giving every applicant that can fog a mirror a huge loan.  Can't afford to go?  That's life.  Work and save up.  Go to a Trade School or local Community College.  Make big sacrifices for that education.  It took me 8 years to get a 4 year degree, and I worked every day I was in school.  Sometime not having the money meant that I had to stay out a semester, or take a reduced course load.  It meant I had to go first to a a Junior College, then transfer to a State supported University.  It never crossed my mind to go in debt, and it never crossed my mind to quit, either.

There are plenty of good, smart, hard-working kids who are doing the same thing today.  The Trade Schools, local Junior colleges, and regional State University branches are booming with them.  The problem comes from the ones who have been either spoiled rotten, or from the ones who really don't know any better, and don't have family with the knowledge or basic understanding of how to suceed, giving them guidance.

Cream will rise to the top.

newdoobie's picture

Here in my part of FL, there are no more Jr. Colleges. Now they are all just colleges and charge the same for an hour of ED as a university

11b40's picture

Which is a direct result of the easy .gov loans.  Without them, the JC's could not jack up those rates and try to soar with the Eagles because they are now 'Universities'.

Gromit's picture

More fake news......'

Hopefully someone will start a prosecution under the recent

Countering Disinformation And Propaganda Act
eatthebanksters's picture

It's going to be so great when the Trump administration gets into office and digs all this corruption and shit up.  Libtards are going to scream how Trump is fucking things up, but the rest of us know he'll be cleaning up the huge mess that Obozo left behind.  I think Obozo really believed that people loved him so much that they would vote for whomever he told them to vote for. Thus he was sure his ass was covered because he would make sure a libtard was the next POTUS.  Guess what?  Trumo is in and he is going to uncover and expose all the corrupt and illegal shit that went down during Obummer's eight years.  Arrest people, put them in jail, set examples...Soros first!!

Drain the swamp...Make America Great!!

Mr. Schmilkies's picture

"I nver thought I would see the day when someone took out $250,000 worth of debt to get a degree in safe spacing."

If it were for safe cracking, well then it'd be worth it. 

 

wolfessannie's picture

Maybe they can intern with Rachel-the-madcow????

CheapBastard's picture

Do NOT forgive these shit heads unless there is some patriotic stipulation. I refuse to pay for their terrorist training.

 

Colleges in the USA are likes Mosques.....terrorist training centers even if their goals are different. Oddly, brainwashed American students today support the war criminals Obama and Hillary instead of the Peace Candidate Trump.

thetruthhurts's picture

Is this kind of like sending in an amended tax form right before the audit?

xythras's picture
xythras (not verified) thetruthhurts Jan 19, 2017 2:27 PM
...
booboo's picture

Hahahahahaha
Millennials.....the new baby boomers

froze25's picture

What do you mean by that? I don't remember the Baby Boomers having student debt loads that huge, or defaulting in mass like this.

unrulian's picture

No I remember them creating huge bloated underfunded pensions to fund their Harleys and trips to Provence that their grand kids will have to pay for.

froze25's picture

So like the Greatest Generation did, I see.

booboo's picture

Froze, yes, millennials have been pissing and moaning for a few years how the baby boomers ruined their life with debt and now they are stiffing their kids with an ass load of debt, now wipe that pious smirk off your face pussies, you know I'm right.

Moustache Rides's picture

I don't know if I'd really trust that site.  Their logo is a slightly altered sigil of Saturn.

Hal n back's picture

look at the good side of this, it has helped the economy.

Take away 1.5 trillion of debt spending and what do we have?

This country cannot handle the truth.

Donald J. Trump's picture

Hopefully Trump will executive order a blank, give me the real numbers to all gov.  Trump is not much of a snowflake, he can handle the bad news.  I bet he is expecting it.

ojiisanusa's picture

new administration new eyes on the old books...dont want to be called guilty so oops fat key mistake...

Keyser's picture

This is going to be the tip of the iceberg on phony data over the last 8 years... With Trump's proposed cuts to federal programs, look for more agencies to fess up to "programming errors" for their erroneous reporting over the last decade... 

SoDamnMad's picture

Who made all these "programming" errors?  All the H1b visa holders / terrorists he brought in?

The_Dude's picture

I'd like to see how much of this is to foreign students.  

Go to school,  get a huge f'ing loan...can't get a job in the US?  Well,  just fly back to India and tell them to suck it.  

Add to this that the foreign students will keep getting degree after degree trying to stretch their time here trying to land a job. 

The Saint's picture
The Saint (not verified) NoDebt Jan 19, 2017 11:46 AM

Obama has made it a policy to lie to America about anything and everything if it was advantageous to him or the Democrapic Party.

The WORST PRESIDENT in U.S. history!!!!!!  The damage Obama has done to America is almost unimaginable.

Chris Dakota's picture
Chris Dakota (not verified) The Saint Jan 19, 2017 1:15 PM

It's really the Demographic Party

it's all they rely on.

wolfessannie's picture

I still think the obadrone is 60% (the harridan is the other 40%) responsible for the orange ape winning the election.  When I was in HS I used to say what my parents didn't know wouldn't hurt ME -- I think that was bush-dark's motto concerning we peons ...

GreatUncle's picture

Fake data is when the ruling elites swear to god (or satan) the numbers are real.

Deceit is revealed when just prior to a new president not of their tribe takes office and the numbers are finally flushed.

This is one of the bonuses of a Trump presidency, truth about the fake data.

The 700K+ more unemployed ... were there all the time but those poor 700K souls were basically dumped by the democrats to make sure their economic method had numbers that implied it was all good.

Flush the lot everything ... no more hiding behind the lies and deceit for know the truth you can fix anything, without it you fix nothing.

Crash Overide's picture

Almost everything about the world we live in is a lie...

de3de8's picture

Roach out from under the prayer rug

Dark Space's picture

Exactly, plus many states will pay off your student loans if you teach there for five years - transferring the federal expense to the state taxpayer...

SilverRhino's picture

Putting up with shitty students in a public school for 5 years?   The state is getting a bargain.  

Miffed Microbiologist's picture

Well with their level of sophistication they would vote for a cashless society and their loans would be paid whether they liked it or not.

Miffed

Kidbuck's picture

No paying it back, Unless they become government workers. What's worse than a bankster? A government employed bankster.

lester1's picture

Wtf is "social justice" anyway?? More made up liberal crap??