If you thought the housing bubble was bad, just wait for the impending collapse of the student loan industrial complex.
Last Friday, the U.S. Department of Education released a memo stating that the department had overestimated the number of graduated students from colleges and trade schools actively paying off their loans.
The updated numbers provide a shocking view into the current economic situation, but also what will be coming in future years.
The Wall Street Journal analyzed the numbers released by the Dept. of Education, and found that the repayment rates were inflated in 99.8% of the schools analyzed.
Before going any further, just let that sink in for a moment. This was not a small technical glitch that skewed numbers in a couple of cases. No, the correct numbers were the stark exception to the rule, and that rule was that the true numbers of loan repayments were never reported truthfully.
Yet for the past several years, the Department has maintained that students are repaying their loans at a rate that is just dandy. Well, by the Department’s own admission, that is not the case (and I am not in the least bit surprised).
The new analysis shows that 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.