The US Government is in a fix owing to a rather old-school data collection system available with the Education Department that prevents quick retrieval of data on approximately 40 million Americans with student loans. The student loan portfolio amounts to $1.1 trillion, according to a report published by the Wall Street Journal last week.
The system is unable to produce data on defaulters with lowered payments, while also being incapable of data analyses on new loans.
According to officials, the key insight needed from the data is: “Why are Americans continuing to default on their student loans—even when their burdens are relatively small—at a time when the labor market and economy are improving?”
Earlier last month, the federal student loan relaxation was raised by $22 billion, as part of an annual accounting revision to update estimates of the projected costs or earnings of federal lending programs, Wall Street Journal reports.
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To better gauge how effective schemes are- and to help distressed borrowers- Rohit Chopra, student-loan ombudsman for the federal Consumer Financial Protection Bureau, explains, “Much more needs to be done to get student-loan data to the level we need.”
“Given the explosive growth in student lending and the rise in student-loan defaults, increasing our understanding is critical so that we don’t repeat some of the same mistakes that happened in the lead-up to the mortgage crisis,” he added.
Denise Horn, an Education Department spokeswoman, pointed out that the system is still being developed through multiple phases over the next few years and will “more easily allow for timely, accurate, and consistent analysis of federal student aid data.”
The US government has been the primary lender of student debt since 2010, a role earlier commanded by private lenders (e.g. SLM Corp.’s Sallie Mae) and were only guaranteed by the government.