The murky world of student-loan statistics

By Felix Salmon
October 21, 2011
post on Wednesday about the total amount of student loans outstanding -- and I've learned a lot about the limitations of official statistics as a result.

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I got some very interesting responses to my post on Wednesday about the total amount of student loans outstanding — and I’ve learned a lot about the limitations of official statistics as a result.

The first thing to say is that the New York Fed figures I published for total student loans are not accurate — they understate the truth of the matter. The New York Fed is aware of this fact, and will revise its numbers for Q2 2011 in coming weeks; when it releases the Q3 numbers, they will reflect the new methodology and will be substantially higher than what we’re seeing right now.

And yes, the new numbers will show that student-loan debt exceeds credit-card debt.

But they won’t show student-loan debt at $1 trillion.

It turns out that the $1 trillion number is not new — it appeared in the lede of a NYT story back in April, which attributed the number to Mark Kantrowitz. Kantrowitz, who runs the websites and Kantrowitz, described by the Richmond Fed as “a leading resource on student financial aid”, has been pushing his own estimates of student-loan debt for a while; he supplied the data for the chart which accompanied the NYT story, and indeed published a very similar chart back in August 2010.

The USA Today story I criticized on Wednesday was interesting because it’s the first story to come up with the $1 trillion number which doesn’t attribute it to Kantrowitz. Instead, it attributed the number to the New York Fed — but the New York Fed has never published a figure for student loans anywhere near $1 trillion.

Kantrowitz claimed in an email to Reuters that “the US Department of Education has confirmed total federal education debt in NSLDS at over $800 billion”. NSLDS is the National Student Loan Data System, but the Department of Education doesn’t publish numbers for the total amount of debt in that system, and it’s unclear where or when this confirmation happened. Kantrowitz also pointed us to the numbers in the president’s budget for FY 2012. If you want to be daunted, go to this page and check it out: it’s absolutely enormous.

I got Nick Rizzo to try to pull out the line items for the cumulative balance of student loans outstanding. There are two main sources for federal student loans — the Federal Family Educational Loan Program, or FFELP, which is being phased out, and the Federal Direct Student Loan Program, or FDSLP. The FFELP has about $390 billion in total loans outstanding –$77 billion in Stafford loans, $81 billion in unsubsidized Stafford loans, $21 billion in PLUS loans, and $211 billion in consolidation loans. PLUS loans are actually loans to parents, rather than to students, but they still count as education debt.

The FDSLP is up to $220 billion in loans outstanding at this point — $58 billion in Stafford, $59 billion in unsubsidized Stafford, $20 billion in PLUS, and $83 billion in consolidation loans.

Add the two together, and you get to $610 billion. There are a few tiny other loan programs in there as well, but nothing which really moves the needle much past that point.

Still, this is just federal loans. These numbers don’t include private-sector student loans at all, and already they’re above the $550 billion that the Fed claimed was the total of all student loans outstanding in the country.

The Fed knew this — Kantrowitz is no shrinking violet when it comes to sharing his findings — and so they embarked on a quest to find out why their student-loan number was so small.

Now it turns out that the data feeding the NY Fed’s household debt and credit report is bought in — the Fed has a contract with Experian Equifax, the credit-report company. Experian Equifax takes a nationally representative random sample of the credit reports that it runs, breaks out the various different forms of debt in those reports (mortgage, home equity lines, auto loans, credit cards, student loans), and passes that information on to the NY Fed, which compiles the report by extrapolating that data to the nation as a whole. And although Experian Equifax has provided data going back to 1999, the New York Fed has only actually published this data series for less than two years — the first release came for the first quarter of 2010.

When it became obvious that the student-loan totals were too low, the NY Fed and Experian Equifax started looking at the data again. And eventually the culprit was found. There was a bucket of random obligations called “Miscellaneous”, which included things like utility bills, child support, and alimony. And it turns out that if you went burrowing in that miscellaneous debt, there was actually a pile of weirdly-categorized student loans in there.

When the NY Fed restates the Q2 figures, and from Q3 onwards, that pile of student loans will get included in the bigger student-loan figure, where it belongs. And the number will rise, probably by a couple of hundred billion dollars. Not enough to bring it to $1 trillion, but enough to make it bigger than total credit-card debt.

The problem is that when the new numbers are restated, the old numbers won’t be. There’s a lot of digging into formerly-miscellaneous line items involved here, and a lot of very old data which was never provided to the NY Fed which needs to be resuscitated and disaggregated. That’s a laborious process, and one which will cost a lot of money. The NY Fed wants to be able to publish the full series in an accurate manner, but it won’t be able to do that for a while, if ever. For the time being, we’re just going to have a spike in the series at Q2 2011, when it stops being inaccurate and starts being accurate. We won’t be able to tell, for instance, how fast student-loan debt has been growing. Which is a bad thing.

And more generally, it’s probably suboptimal that the best public data series for student-loan debt comes from a sample of credit reports from Experian Equifax. Since the government owns the vast majority of student loans, why can’t it just publish accurate data for total federal student loans outstanding? That would certainly be easier than having to piece such things together from dozens of disparate line items in the annual budget. I suspect, too, that the government also has pretty good data on private student loans, as well. But putting a data series together is a big undertaking: you have to find the data going back quite a ways, and then you have to commit to updating it on a regular basis. I suppose that no one really cares enough to have made that happen, ever — with the result that no one really knows for sure just how much America owes in student loans.

But when the NY Fed releases its new numbers, those will probably be the best we’ve got. Even if they’re flawed.


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More important is debt per student. It is not possible to grow debt per student from existing levels given the limits on the incomes of the person no longer in school. Tuition rises simply can’t continue to be funded with student debt as they have in the past. Student loans per student have reached fundamental limits.

“A common rule of thumb: Never borrow more than you expect to earn with your starting salary. For example, according to the National Association of Colleges and Employers, starting salaries for elementary school teachers, social workers and journalists are about $30,000 a year. A student who borrows that amount can expect a monthly payment of about $345, based on a standard 10-year payout. That’s about 17 percent of their take-home pay. That’s do-able, but with less than $2,100 montly earnings after taxes, it will leave little to spend on anything other than essentials and will make it almost impossible to save.” s.shtml

Of course, if the student has no starting salary because they are unemployed the problem is even worse. Some students have much more than $30K in debt.

Posted by tgriffin | Report as abusive

I disagree… we need to find out HOW MANY PEOPLE this is really affecting. In a previous post, I noted that there may be upwards of 30 – 40 million adults in this country who are NOT actively paying on their loans.

And don’t try to tell me that the Feds don’t know that number, or that it’s a difficult ‘data set’. Hogwash. Totals are the EASIEST code to write so gimme a break…

And even if no one got more of a loan than their first year’s salary, it does not take into account the predatory and inflationary practices of the lenders, nor their mafia-esque collection powers.

“The problem is that when the new numbers are restated, the old numbers won’t be” – again, this is the INFORMATION AGE and of COURSE they have these numbers… it would be impossible to create the mathematical gyrations necessary to sell SLABS without them. Again, HOGWASH.

Those may be the best numbers we get, but they aren’t the best numbers available…

Posted by Dorothy95 | Report as abusive

“And don’t try to tell me that the Feds don’t know that number, or that it’s a difficult ‘data set’. Hogwash. Totals are the EASIEST code to write so gimme a break…”

Easy to code if you HAVE the data set.

Is it possible that the data on the loans has never been collected in one place? That each originating entity retains its own information without reporting to a central repository?

Not that this would be an excuse. Any program receiving special federal treatment and/or subsidies ought to be carefully regulated.

“And even if no one got more of a loan than their first year’s salary”

I’m hardly an expert, but I would expect that the largest loans are taken by law school, B-school, and med-school students. It is hardly a homogenous population, and thus difficult to analyze on the basis of mere totals.

“In a previous post, I noted that there may be upwards of 30 – 40 million adults in this country who are NOT actively paying on their loans.”

Seems high… That would represent every man and woman between the age of 20 and 30, or half of those between 20 and 40. The *total* number of adults in this country with student loans is likely around that figure, and most of them are actively paying.

Posted by TFF | Report as abusive

“But the Department of Education doesn’t publish numbers for the total amount of debt in that system”

Data on federal student loans outstanding is not hard to come by. For example, just go to the Budget Appendix (this one from 1998, but the same info is in every Budget): df/appendix/edu.pdf

p437 – Status of Direct Loans
p441 – Status of Guaranteed Loans

Posted by thruth | Report as abusive

Oh, it’s much deeper than this because the numbers only focus on official loans. There’s all sorts of off-balance-sheet debt that makes it much, much scarier. Between home equity loan, intergenerational loans and 401k borrowing, it looks like Enron-grade games that push the debt from sight.

Here are some of my unscientific speculations:

Posted by Edububble | Report as abusive

Edububble is excellent, check out those links above.

It will be hard to calculate total outstanding private loan debt, however it’s dropped from the 2006-2007 highs of 20+ billion per year to probably around 10 billion this year in new origination. My Back of the envelope calculation is about $100 billion outstanding now, nothing compared to the outstanding Federal loans. How much longer can the fed keep guaranteeing loans to students at high fixed rates? Seems like the students should have access to a lower rate with the current environment. Unsubsidized Staffords are 6.8%, Parent Plus is 7.9%. Seems like a big spread for the Fed to make considering these are non-dis-chargeable in bankruptcy.

Crazy thing is that there are no student loan consolidators for private loans out there. If you are one of the large private loan providers and originated applications at 10.8% from 2002-2008, why would you ever want to help your customer to consolidate to current rates? Only Wells Fargo and the Credit Unions are taking private loan consolidations, they want to get more clients by volume. Too bad our direct loans program can’t consolidate loans for a lower rate for students:

Posted by Ken55 | Report as abusive

The Federal Reserve Bank of New York’s Q3 2011 Household Credit Report corrects the Q2 figure to $845 billion (a $290 billion increase) and provides a Q3 figure of $865 billion. See nal_economy/householdcredit/DistrictRepo rt_Q32011.pdf

Posted by mkant | Report as abusive

This is definitely a great write-up. The murky world of student-loan statistics is actually a big factor for those who are searching for payday loans. I agree that payday loans loan providers which aren’t responsible can cause problems, which makes it even more important to look for responsible ones.Don’t take chances with payday loans. Always check the registration number of their company as well as whether or not you’re able to contact them. If something goes wrong, you want to be able to be in touch with them.

Posted by Eugene09 | Report as abusive

I stumbled upon this article after reading some crazy stuff on the Huffington Post today in an article that said student loan totals had grown from $100 billion a year ago to $1 trillion this year. That is frightening enough. But then I read these comments and realize how “murky” it really is, and my head is about to explode. But here is a thought, many parents are not borrowing from their 401k accounts. They are withdrawing them outright, tax payments and all. It is the only way to ensure that your child will not emerge from college with his newly minted degree only to immediately become a wage slave for the rest of his life.

Posted by suahh | Report as abusive

The Online Guidance services for Student Debt in the UK are building up all the time and it’s difficult to know which offer the best student loan consolidation advice.

Does anyone have any advice about good sites?

Posted by ZackNeeds | Report as abusive

I believe it would behoove the taxpayers who will be required to bail out students in arears, while trying to pay for the education of their own children, to demand the IRS tax returns filed by the parents of the indebted students are reviewed to determine if they can readily provide the payments needed to bring their student up to date. There are many who have taken these loans because it was cheaper to do so, than to use accumulated assets that were earning higher rates of return than what the student would be assessed for the student loan. Those having the assets to pay up should be required to do so, or have their assets attached by the IRS. We are tired of being taken for a ride by those who can pay their own way, but prefer to scam the system.

Posted by ettucat | Report as abusive

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