Education Dept. Spends more than a Billion Dollars a Year Tracking Down Student Debtors
It takes money to collect money, just ask the U.S. Department of Education.
Education officials in Washington spent $1.4 billion last year to track down student-loan defaulters who owe a total of $76 billion.
Of the $1.4 billion paid out, $355 million was paid to nearly two dozen companies specializing in private debt collection. Another $1.06 billion was allocated to “guarantee agencies,” nonprofit organizations or state government agencies that administer student loan. Guarantee agencies often outsource the dirty work to debt collectors as well.
Tracking down people who have fallen behind on their student loan payments has grown considerably in recent years. Nearly six million Americans are at least 12 months behind, which is 30% more than there were about five years ago.
Overall, Americans owe more than $1 trillion in student loans. Students who attended for-profit colleges account for almost half of the defaults even though they make up only about 11% of students. The biggest lenders are the SLM Corporation (aka Sallie Mae), Wells Fargo, Discover Financial Services, NelNet and JPMorgan Chase.
-Noel Brinkerhoff, David Wallechinsky
To Learn More:
Debt Collectors Cashing In on Student Loans (by Andrew Martin, New York Times)
Who’s Profiting from Student Loans? (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Student Loan Debt Reaches $1 Trillion (by Noel Brinkerhoff, AllGov)
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