Monday, December 10, 2012

The Truth about Student Loan Debt in America

As someone with student loans, I dread the day when I have to repay my student loan debt. Below, I provide fifteen facts on why student loan collection is sadistic and needs major reform. Next year, Congress should act immediately on this financial aid crisis as well as remove the ban on student loans in bankruptcy.

  1. There is no way to escape student loan debt.
  2. Nearly one in every six borrowers with a loan balance is in default.
  3. Last year, the U.S. Department of Education spent over $1.4 billion to hire collection agencies to hunt down these defaulters.
  4. Government debt collectors can seize almost any kind of asset.
  5. In 2011, the government recouped more than $2.67 billion using these methods.
  6. High recovery rates have meant that less is done to prevent default.
  7. Penalties on loan defaults can be as high as 25% of the balance.
  8. Debt collectors hired by the government rarely explain the options debtors have for repayments.
  9. Debt collectors are rewarded for collecting as much of the money owed as possible regardless of the hardship that causes debtors.
  10. Collection agencies have little incentive to change because many receive huge commissions.
  11. Student loan collection contracts are gold mines for collection agencies.
  12. The average defaulted loan is worth about $17,000.
  13. If a debt collector hasn’t found a defaulting borrower in six months, the case gets passed on to another agency.
  14. Debt collectors are the subject of thousands of complaints every year.
  15. Loan collections have increased by 18%.

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