Last month, The Wall Street Journal reported that 43 percent of borrowers who owe on their student loans weren’t making payments. According to the WSJ, that’s about 9 million people.
How about the 57 percent of borrowers who aren’t delinquent? Are they faithfully making their monthly loan payments and whittling down the principal of their loans?
Not all of them. Approximately 2.5 million borrowers have economic hardship deferments that exempt them from making their monthly loan payments, and millions more are enrolled in Income-Based Repayment plans (IBRPs), which result in payments so low that they don’t cover accruing interest.
The General Accounting Office recently reported that 4.5 million borrowers who were current on their income-driven repayment plans were paying zero on their loans due to their low income.
In 2018, Education Secretary Betsy Devos gave a speech comparing the federal student loan program to a looming thunderstorm. Only one out of four borrowers, Devos said, were paying down the interest and principal on their loans.
Do you think student loan repayment rates have improved since Secretary Devos made that speech six years ago? No, they haven’t. In fact, almost no one paid on their college loans for three years due to the COVID crisis.
Indeed, the federal student loan program is in disarray, mainly due to the Department of Education’s mismanagement. DOE couldn’t do a competent job when it was tasked with designing the standardized financial aid (FAFSA) application
Now, President Trump has transferred the administration of the student loan program to the Small Business Administration. If Trump hasn’t been sued yet for this move, he will be soon. After all, his administration has been sued more than 100 times during the first two months of Trump’s presidency.
Critics should refrain from slamming Trump’s efforts to reform the federal student loan program. The only sector of the American economy benefiting from the status quo is the higher education industry, which charges students an exorbitant price for college degrees that often fail to prepare graduates for the world of work.
