EduBubble

Let’s say you’re given the job of figuring out how many peo ple are making payments on their student loans. Would you immediately rule out the people who had an “approved” excuse not to pay because of financial hardship?

You would if you were the Federal Reserve Board, the rug-sweeper-unders whose new pile of manure is described by Ron Lieber and Andrew Martin at the NY Times. And why not? The Fed’s main job seems to be coming up with ways to paper over the profligate habits of the U.S. Government. Why not deploy the same clever tricks to hide the student loan bubble?

How many have an “approved” excuse not to pay? 47%. That’s right. Essentially half of the people out there with student loans aren’t paying because they’re in graduate school or because they’re under “financial hardship”. That’s a huge number.

But wait, there’s more. Of the 53% who somehow haven’t found an “approved” reason not to pay, a full 27% are past due more than 30 days.

Now Mr. Martin and Mr. Lieber should be ashamed of repeating this sophistry from the Fed. If I were in 7th grade working a percentage problem on my homework, I would multiply 27% * 53 to get 14.3% and then add this to 47% to conclude that 61% are not paying.

But then this may be why I’m not working for the Fed. They reincluded the people with approved reasons and decided that only 14% are delinquent. Whoo hoo! The size of the problem is cut in half. See, this is why we break our backs to send our kids to school. They can learn mathematical sophistry like this!

But wait, there’s more. While I can’t be certain, the structure of the sentences leads me to believe that they only looked at Federal loans. And naturally, they didn’t look at the overall family debt which is an unknowable quantity. Nor did they consider the shadow debt that I’ve described again and again. But hey, only 14% are in real default.