Overwhelmed With Student Loan Debt?


Right now, student loan debt is at an all-time high. The number of people borrowing from the government is at an all-time high and so is the number of people in default—nearly 5.9 million or about $76 billion. The average default amount was $17,005.00 in the 2011 fiscal year. Borrowers who attended profit-making colleges—about 11 percent of all students—account for nearly half of defaults, while dropouts were four times as likely as graduates to default. A student loan debt is declared in default by the Department of Education when it is delinquent for 360 days. Borrowers are most often declared in default when they cannot be found. That is when the collection agencies take over.

Because the government has many more liberties and tools at its disposal, it has an impressive collection rate at 80 cents on the dollar from those that default on government loans. This is compared to the paltry 20 cents on the dollar for consumer credit card collections. Unlike private lenders, the government may seize tax refunds and garnish paychecks and social security checks, among other measures. There is also no statute of limitations for government loans and debtors are unable to discharge the loans in bankruptcy, as one can do with most debts, such as credit cards and mortgages. In fact, the two most common non-dischargeable debt—student loans and taxes—just happen to be held by the federal government. The federal government is notoriously difficult to shake. In fiscal 2011, the department wrote off less than 1 percent of its loan balance, and those were only under extreme circumstances such as death or disability of a borrower.

Collection agencies, on the other hand, are thriving and couldn’t be happier for the student loan debt business. Especially as other targets for debt collection, i.e., credit card debtors, have declined recently. Of the $1.4 billion paid out last year by the federal government to collect on defaulted student loans, about $355 million went to 23 private debt collectors. The remaining $1.06 billion was paid to the guarantee agencies to collect on defaulted loans made under the old loan system. That job is often outsourced to private collectors as well. Government officials estimate they will collect 76 to 82 cents on every dollar of loans made in fiscal 2013 that end up in default. That does not include collection costs that are billed to the borrowers and paid to the collection agencies.

Though there are programs, such as income-based repayment plans, in place to assist borrowers struggling to remain in good standing, most debtors do not know that they exist. Introduced in 2009, income-based repayment was supposed to help change that by allowing borrowers with high levels of debt but modest incomes to make relatively small payments over a long term. But many borrowers were never told about the income-based option, and many others have been frustrated by the onerous requirements. So far, 1.6 million borrowers have applied for income-based repayment; 920,000 are active participants and another 412,000 applications are pending.

If a debt collector harassed you over a student loan debt, whether they called you excessively, threatened you, made misrepresentations when trying to collect old debts, called you at work despite knowing you cannot receive these type of calls at work, disclosed your debt to a third party, tried to collect a debt from you that you did not owe, or left you a voicemail message without the proper disclosures, contact Agruss Law Firm, LLC, for a free case evaluation. Founding attorney, Michael Agruss, has settled over 1,500 debt collection harassment cases. Now, Agruss Law Firm, LLC, wants to help you, too.

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