What a confidence builder, eh? This looks more like a confidence game, though, in support of the Obama administration’s war on for-profit schools. The Wall Street Journal’s editorial board blasts the Department of Education for waiting months to disclose that they had made a huge error on student-loan defaults, even while issuing regulations that hammered for-profit schools on the basis of that error:
In early January the department disclosed that it had discovered a “coding error” that incorrectly computed College Scorecard repayment rates—that is, the percentage of borrowers who haven’t defaulted and have repaid at least one dollar of their loan principal. The department says the error “led to the undercounting of some borrowers who had not reduced their loan balances by at least one dollar.”
The department played down the mistake, but the new average three-year repayment rate has declined by 20 percentage points to 46%. This is huge. It means that fewer than half of undergraduate borrowers at the average college are paying down their debt.
Prior to this admission, the Department of Education had claimed that only a third of all student loans had never begun repayment — but that the rate soared to over half at for-profit schools. Based on that calculation, DoEd finalized a rule that required those schools to post a warning in all of their promotional materials to the effect that their students tended to be deadbeats. State-based and non-profit private colleges are exempted from those disclosures, based on the bad math performed by the DoEd.
However, it wasn’t just bad math, as the WSJ’s editorial board points out:
Marc Jerome, president of for-profit Monroe College in the Bronx, discovered the Scorecard rate inflation last August. In several emails to Education officials, he urged the department to hold off on finalizing the regulation. If the regulation were applied evenly, a large number of nonprofit and public institutions would fail to meet the standard. But then the justification for the department’s selective regulation of for-profits would vanish.
The department finalized the regulation in October anyway, perhaps anticipating a Hillary Clinton victory that would allow the repayment inflation game to keep going. Yet now it’s taking credit for discovering and fixing the Scorecard error that likely would have been uncovered by the new Trump Administration.