The murky world of student-loan statistics
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 FinAid.org and Fastweb.com. 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.
TEXT: S&P Asgns Japan Prime Realty’s Series 13 And 14 Bonds ‘A’ Rtgs
JPR has secured a relatively strong position in the J-REIT market, backed by the real estate management and development capabilities of its sponsors, which include Tokyo Tatemono Co. Ltd. (NR). As of Sept. 30, 2011, JPR owned a portfolio of 43 office buildings and 14 retail properties with a total purchase price of about JPY345 billion.As JPR is able to procure funds in a steady manner and has ample liquidity on hand, it has tapped into these strengths to make acquisitions. In particular, the J-REIT acquired Ginza Sanwa Building (Chuo Ward, Tokyo; purchase price: JPY3.4 billion) in August 2011, showing that it is able to maintain moderate external growth. In addition, JPR is strengthening its financial base, and we regard this as a positive factor for the J-REIT’s credit quality. Specifically, the J-REIT secured additional committed credit lines from July 2011 to October 2011, and as of July 8, 2011, JPR no longer had any secured borrowings from financial institutions outstanding.On the other hand, we see risk factors that may affect JPR’s credit quality: (1) JPR’s profitability and interest coverage indicators remain weak amid severe business conditions; (2) it has a level of unrealized losses in its portfolio, indicating that the J-REIT’s financial buffer has weakened, although the rate of increase in these losses has slowed; and (3) its debt-to-capital ratio is hovering at levels that are slightly high compared with the J-REIT’s cruising level. However, it is our view that these risks are partially mitigated by: (1) some expected revenue support from newly acquired properties; (2) JPR’s track record of controlling its debt level; and (3) its improving occupancy rates.RELATED CRITERIA AND RESEARCH”Key Credit Factors: Global Criteria For Rating Real Estate Companies,” published June 21, 2011”Principles Of Credit Ratings,” published Feb. 16, 2011”Rating Policy For Japanese Real Estate Investment Trusts,” published May 9, 2001
US lawmakers say pipeline approval process tainted
By Timothy Gardner and Jeffrey JonesWASHINGTON/CALGARY, Oct 13 (Reuters) - U.S. lawmakers will urge Secretary of State Hillary Clinton on Friday to reject the proposed route of the Keystone XL oil sands pipeline, saying they are concerned the approval process has been tainted by alleged conflicts of interest.Representative Earl Blumenauer, a Democrat, will send a letter to Clinton, signed by more than 20 other lawmakers in the House, criticizing how her department has handled the review of TransCanada Corp’s $7 billion pipeline proposal to move crude to Texas from Alberta, Canada.Among other things, the lawmakers are concerned about a report in The New York Times that the contractor the department used to evaluate the environmental impacts of the line, Cardno Entrix, has worked on other projects with TransCanada. They said that raises questions about the impartiality of the environmental assessment.”These relationships alarmingly suggest that the process may not have been objective, and this decision is too important to be clouded by even the appearance of impropriety,” the letter says.The law allows U.S. agencies to hire contractors to do environmental assessments, but says the companies should sign a disclosure statement outlining they have no financial interest in the outcome of the project.In this case TransCanada recommended Cardno among two other contractors to the department, and paid the contractor, although Cardno answered to the State Department.Cardno, which also conducted public hearings on Keystone XL for the State Department over the last few weeks, did not disclose it was already working with TransCanada on another project, the Bison natural gas line, according to documents seen by Reuters and obtained from the State Department by Friends of the Earth, an environmental group and staunch opponent of Keystone XL.”Why would a company which is basically an oil industry company be hired in the first place to conduct an environmental impact statement on industry? That’s a classic fox in charge of the henhouse scenario,” said Damon Moglen, climate and energy director for FOE.”There are plenty of environmental contractors who don’t have ties to the oil industry who could subcontract for oil pipeline expertise but are completely neutral on this matter.”Environmental groups and some politicians oppose the pipeline, which would carry up to 700,000 barrels a day of oil. They say a spill could jeopardize a major aquifer in the central United States and that the pipeline would foster more development of the carbon-intensive oil sands.Supporters say it will provide thousands of jobs and decrease dependence on oil from countries that are unfriendly to the United States.”FINAL PRODUCT UNACCEPTABLE”The State Department issued a final assessment in August that said the pipeline would have only minor impacts on the environment.Now it hopes to decide by the end of the year whether the pipeline is in the country’s national interest and grant TransCanada a presidential permit, the final go-ahead the company needs before construction.But the lawmakers said the State Department is moving too fast and the assessment did not adequately study the risks to the aquifer. “Any manipulation of the EIS process taints its outcome, and makes the final product unacceptable as the basis for a finding of national interest,” the lawmakers said in the letter. “We request that you find the proposed route not in the national interest.”A Cardno Entrix official at the company’s Seattle office referred questions on the issue of relationships with TransCanada to the State Department, which did not immediately respond to a query.A TransCanada spokesman said claims of conflict of interest are baseless. Cardno Entrix has evaluated other TransCanada projects, but always as a contractor to regulators such as the State Department and Federal Energy Regulatory Commission, not the company, TransCanada’s Terry Cunha said.”As a result, we don’t have a direct relationship with Entrix — we never had,” Cunha said.
Senior Republican presses Obama on China yuan bill
“What I would like to see is where the administration is. Clearly they’ve got concerns as well,” Cantor, the number two in the Republican-controlled House, told reporters.Last week, House Speaker John Boehner warned that the legislation was “dangerous” and could start a trade war.Passage of the bill would create a dilemma for Obama, whose re-election prospects next year could hinge on whether voters believe he is doing enough to create American jobs.If he signed the bill, there could be a powerful backlash from China; if he vetoed it, he could pay a political price — particularly in battleground industrial states like Ohio and Michigan.The Democratically-led Senate is expected to pass the bill by a wide bipartisan margin, putting pressure on House leaders to take up the popular bill or accept blame for its demise.Cantor’s comments appeared intended to make sure the White House shares responsibility for the fate of the bill.”I think all of us are very concerned about the competitiveness of our manufacturers in this country and the unfair practices by China and others,” Cantor said.Many economists say China holds down the value of its yuan currency to give its exporters an edge in global markets.”UNDERVALUED” YUANSome U.S. lawmakers contend the yuan is undervalued by as much as 25 percent to 40 percent, making it hard for American products to compete on price with Chinese-made goods.A key provision of the bill would require the Commerce Department to consider whether undervalued currencies act as an effective export subsidy that justify the United States applying countervailing duties in response.Obama, who has preferred dialogue with China to punitive measures, last week said China was “gaming” the international trade system.But he has not taken a formal position on the bill and cautioned that it must be compatible with World Trade Organization rules. Obama has not said how the legislation might run afoul of World Trade Organization rules.Senator Rob Portman, an Ohio Republican, told Reuters he intended to vote for the currency legislation, even though he preferred the Obama administration lead a multilateral effort to pressure China to revalue the yuan.”I have some concerns about the legislation, which I’ve expressed … But I think it’s time to send a strong message,” said Portman, a former top U.S. trade official whose home state is the same as Boehner’s.”This is an opportunity to raise the visibility of the issue and to encourage the administration to address it more vigorously,” Portman said.