American Student Debt Crisis: Costs $38 to collect $1, Cancelling Uncollectible Defaults Screws the Honest

As it turns out, it costs DEBT-MONEY to collect Debt-Money.  The cost of the government collecting $1 in student loan debt costs about $38.  This figure is likely the reason why Congress is trying to WIPE OUT such overly wasteful collection.  It would be LESS EXPENSIVE to literally pay the student loans off with the expense of collecting it.  This is on the heels of a total breakdown of the Defaulted Student Loan Collection System…  where they legally cannot collect any more student defaulted student loans.

That said, rather than redirect the $38 to pay off ALL STUDENT LOANS, Congress decided to simply put forth a BILL to cancel all delinquent student loan debts.

The issue -of course- is that all the honest people who thought that paying their student loan was the “right thing to do” are getting screwed.  All the people who couldn’t pay their student loans, get their debts written off.

Working to pay off the debt is punished with more interest, while dishonor and delinquency of the debt is supported with cancellation.   How is that acceptable to Americans?

The mechanism of the Congressional Bill to DISCHARGE the Student Loan Debts is literally a mechanism of creating EVEN MORE Debt.  Congress is issuing more BILLS (aka a term of debt), to pay the student loan debts.  In doing so, they are only creating more debt rather than extinguishing it.

The entire Student Loan DEBT FOR MONEY system is a bait and switch ponzi scam being operating by International Bankers and their treasonous BAR Attorneys.

Americans Are Paying $38 to Collect $1 of Student Debt

Your government at work with your tax dollars. Loan billions to brain dead teenagers so they can pretend to get smart in college. When they fail miserably due to the fact after twelve years of public school government indoctrination they can’t read, write or add, the government pays slimy collection agencies to get these unemployed dolts to pay up. Not only has $600 billion of your tax dollars been pissed down the drain on loans to dumbasses, you now get to spend billions trying to collect the billions that will never be collected. Clusterfuck is too kind of a word to use for this program Obama initiated to pump money into the economy and fake the true unemployment rate. I bet you can’t wait until the government has full control of your healthcare.

The federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.

Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation. They keep those funds even if borrowers subsequently default again, contracts show. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.

The findings, gleaned from the bureau’s analysis of about 600,000 borrower accounts, come as the Trump administration weighs a shakeup of the government’s student loan program. For years, defaults have mounted despite the improving U.S. economy and the money invested in collecting education debt. Education Secretary Betsy DeVos pledged earlier this year to “do a better job” than the Obama administration at managing the department’s loan contractors. Last week, DeVos suggested that the feds should “start afresh.”

Officials at the CFPB say the government should reexamine whether the loan program, and the lucrative contracts it bestows on private firms, is working for the millions of Americans struggling to repay their taxpayer-backed student debt.

“When student loan companies know that nearly half of their highest-risk customers will quickly fail, it’s time to fix the broken system that makes this possible,” said Seth Frotman, the consumer bureau’s top student-loan official.

Debt collectors aggressively angle for new business from the Education Department because the contracts are among the most lucrative in the industry. The government values the latest round at $2.8 billion.

The government often pays debt collectors nearly 40 times what they bring in, federal records show. Take the government’s rehabilitation program, which targets people who have defaulted on their debt—meaning they missed nine months of payments. If a borrower subsequently makes nine on-time monthly payments of as little as $5 during a 10-month period, their loans are returned to good standing and the default is supposed to be wiped from their credit reports 1 . But the CFPB found that more than 40 percent of these borrowers defaulted again within three years.

Even when borrowers don’t default, debt collection efforts often yield little. Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of Higher Education Resources, a lobbying group that represents student debt collectors and servicers. That means the Education Department is paying its debt collectors up to $1,710 per borrower to collect around $45, regardless of whether the borrower continues to make her payments.

The arrangement means that debt collectors “have no ‘skin in the game,’” Frotman wrote in an October report.

The consumer bureau estimates that the vast majority of borrowers who rehabilitate their defaulted debt with $5 monthly payments are eligible for $0 payments after they exit default, under an income-based repayment plan. But about 90 percent of debtors who rehabilitated their debt failed to enroll in these programs, according to the CFPB’s analysis. All that’s needed to enroll is some paperwork that enables contracted loan servicers to confirm borrowers’ annual earnings, but experts inside and outside the government say they don’t know why this step isn’t completed, and distressed borrowers are left stuck in debt collectors’ sights. The Education Department, which rewards its loan servicers with more business if the loans they service remain in good standing, excludes rehabilitated loans when grading its servicers’ performance.

A Convenient Way to Cancel a Trillion Dollars of Debt

What happened:

Bankruptcy is like the ultimate get out of jail free card. You just get to wipe the slate clean, and even though your credit score and ability to borrow might suffer, you are free from all your previous obligations. But student loans have long been exempted from being erased by bankruptcy.

If this bill passes Congress however, hundreds of billions of currently delinquent student loans, potentially as much as $1.4 trillion worth of student loan debt…

…. would be eligible to be wiped out by declaring bankruptcy.

As the number of those defaulting on their student loans grows, this provision could be widely used by those seeking to escape their college debt.

What this means:

The government has helped raise the costs of college and basically scam people into accepting their loans, so it is easy to be sympathetic towards those with student loans. But still, it is messed up to allow people to discharge debts they agreed to pay.

There might be a little piece in most of us that doesn’t mind seeing what we consider a predatory lender get screwed and be left with the bill.

But apart from the overall immorality of failing to pay your debts, since the government owns most of the student loans, it would basically be the taxpayers getting screwed over once again. What a surprise.

Basically if massive amounts of debt were erased, it would be another bubble bursting, which would send the U.S. into a fresh round of economic instability.

The economy would spiral downward in relation to how many people took advantage of their get out of jail free card.

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2 thoughts on “American Student Debt Crisis: Costs $38 to collect $1, Cancelling Uncollectible Defaults Screws the Honest”

  1. The “debt” is a bogus invoice served to US by banksters claiming we owe them 3% of GNP for “managing” the economy (compounding) since 1913. What they don’t tell US is they own ALL the currency and pay about 4 cents per bill of every denomination. That’s how they can lower the prime rate to 0% and still make money like pigs. Taxation to fund the Federal budget is just their solution to not having to give anything back. All debt in America is prepaid thanks to HJR 192 when the right to discharge debt was given in exchange for the nation’s gold reserves and claim to all property title and labor of every US citizen. Since the bankers loan nothing of their own, provide nothing of value, have no skin-in-the-game, every American has the right to discharge their debt, in bankruptcy, Accepted-&-Returned for Value, or the payment of one promissory note for another, if they only knew it.


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