Collecting $1 Of Student Debt Costs American Taxpayers $38

Tyler Durden's picture

Authored by Jim Quinn via The Burning Platform blog, 

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.

 

College

 

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.

While Congress originally approved the IDR plans in the 1990s and 2000s, Obama used executive actions, starting in 2010, to extend the most-generous terms to millions of borrowers which is precisely when loan volumes under the program started to skyrocket.

Student Loans

Congrats, taxpayers...you'll soon have the privilege of repaying $137 billion worth of debt spent by entitled millennials on binge-drinking trips Cancun and drugs...life, after all, is just a little bit better when we spread the wealth around...

As Bloomberg's Shahien Nasiripour reports, 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. 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.

The consumer bureau says slipshod loan servicing—the business of counseling borrowers on their options and sending them monthly bills—is largely to blame. NCHER President James Bergeron said the feds need to simplify the various repayment plans they offer and “do a better job” helping previously defaulted borrowers get into repayment plans. Calls and emails to the Education Department weren’t returned.

“I don’t see how anyone wins from this system other than the collection industry,” said Adam S. Minsky, a Boston-based lawyer who represents student debtors.

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WTFUD's picture

Married to the Mob!

Whenever my financial service clients faulted on payments i had to return my commission. It's all downhill from here. Man the lifeboats!

macholatte's picture

 

... this program Obama initiated to pump money into the economy and fake the true unemployment rate.

I smell Soros

AltRight Girl's picture

Nevermind, is a price worth paying just to see those leftard snowflakes cry when their faggy art school diplomas won't get them a KFC job and their Priuses are repossessed. 

Can we have it on a TV show like Cops?  I'd watch that.

Now watching Snowflake Debt Collector: where female studies graduates are grabbed by the...Debt.

and by the way... cry all you want...no LGBT teachers will save you.

Crazy LGBT “Teacher” Called out For Bullying Christian Students


John Law Lives's picture

***   SPAM ALERT   ***

Do not click on AltRight Girl's link.

AltRight Girl = SPAMMER  

Art Van Delay's picture

Big word for such a small snowflake. 

John Law Lives's picture

Gee, you are so clever,  I don't think the rest of the ZH regulars realize that "AltRight Girl" posts SPAM and then logs in using other ids including "john doeberg" and "Art Van Delay"  etc. and upvotes the original post.  Gee, you are clever.  You have everyone fooled...

F.O.A.D.

JRobby's picture

That's a great ratio! 38:1!!

Sounds like "investment bank" leverage, but of course they are "professionals"  and can manage it amazingly (with a GOVT backstop when they fail)

So this is another one for the "win" column in the "Obama Legacy"

Ahmeexnal's picture

Are these venezuelan graduates? They seem to be wearing the venezuelan flag around their necks.

mike_king's picture

Liberal arts colleges should be sued into bankruptcy. Trump University actually had some practical value in the real world, and the scumbags still sued the God-Emperor.

tmosley's picture

Best solution: drop the government guarantee and force the lenders to deal with it.

Get the government out of the student loan game. Get them out of EVERYTHING.

847328_3527's picture

Student loans should be backed by the teachers' pension plan assets so teachers have a dog in the race.

tmosley's picture

That is quite possibly the best thing any human being has ever thought of.

boattrash's picture

I'd rather get the $$ from the Congressional Retirement Fund first, then hit the Teacher's Fund to make up the difference.

shovelhead's picture

Yup.

Something like those that smelt it dealt it?

nmewn's picture

But thats "it" right there.

After they have wrapped their tentacles around and through EVER-Y-THING we are made to argue on "their" ground..."You obviously want cheeelrin to die!"...is usually first, followed closely by..."You must want dirty air & water, sociopath!"...the statists have indoctrinated them well inside the re-education camps. 

Just look at "healthcare" now, ObamMaoDon'tCare is imploding but the hue & cry is "Twenty gazzilion people will be without healthcare if it is repealed!"...which is absolute bullshit and they know it but it doesn't matter, it paralyzes debate. 

clade7's picture

Anyone with kids would know that 38:1 ratio of 'investment to return' is about right...even if they never went to college...those fuckers will wreck all of your shit!

Altesh's picture

Just make student debt defaultable and let the kids default on that shit. In the long run it will be better for the country. The student debt racket is evil and makes slaves out of an entire generation. 

. . . _ _ _ . . .'s picture

"...and makes slaves out of an entire generation."

That's what they want.

hooligan2009's picture

from here: "debt collectors up to $1,710 per borrower to collect around $45, regardless of whether the borrower continues to make her payments."

what is really going on is that the debt collectors pay the student loans off for 9 months at 5 bucks amonth so that they can receive 1,710 from the government.

debt collectors are simply working a scam against a stupid government agency, or a government agency whose staff are in on the scam.

Infinite QE's picture

And (((who))) are the debt collectors???

DuneCreature's picture

We could go back to home schooling and save a buck.

https://www.youtube.com/watch?v=7TtOp0semPA

Live Hard, The Russians Seem To Do Alright Teaching Their Kids At Home, Die Free

~ DC v5.0

hardmedicine's picture

I SAY DRAW AND QUARTER WHOEVER MADE SCHOOLS "PUBLIC"

Anyone having children should be responsible for paying for their education............ that is from kindergarten ON!!!!  I get so fucking pissed off when the people down the street can't afford to feed the kids they have so HOT DOG........ they have 3 more and I am responsible for paying to school them. 

 

WHY DOESN'T THIS SYSTEM COLLAPSE ALREADY. 

Golden Showers's picture

Thank you. The only thing I can say is wonder. thaumazein. to wonder. Language is genetic, so they say. If only people were half as happy the world would be different.

To compare and contrast in the states we have JonBenet Ramsey beauty pagents. The Jackson 5. The Mickey Mouse Club. Kubrick provided a glimpse of this at the end of his Full Metal Jacket. I'm astonished.

Xredsx's picture

it is cheaper to wipe debt then it is to collect it....  Humanity has suffered enough. 

. . . _ _ _ . . .'s picture

At 38:1 it would be cheaper to offer free university, like Gadaffi did.

Xredsx's picture

Yes a.nd it would be cheaper to give every free energy too. SMILE xxx

. . . _ _ _ . . .'s picture

Now we're getting somewhere!

TeddyBear's picture

Who's in charge now ????

JLee2027's picture

Perfect example of why all Government created debt should be reset

Mini-Me's picture

Did Obama do anything during his eight years in office that didn't turn into a steaming pile of shit?

mary mary's picture

I can't think of a single thing.  Anybody else?

JLee2027's picture

Flush all debts, go back to a Gold/Silver system, enforce the borders, raise all Government revenue by usage fees, drop Income Tax, and you will ignite the largest economic boom in human history!

SMC's picture

FUBAR. alleged "government" as usual in the USSA today.

LeftandRightareWrong's picture

The govt. backs student loans AND gives parents a 529 deduction.  Any wonder why tuition is sky high?  Look at residential real estate.

Golden Showers's picture

Anyone recall filling out a Selective Service card at the Post Office? Otherwise no student loans for you. What's up with that?

mary mary's picture

Don't get the connection.  Do higher home values cause higher tuitions?

Savvy's picture

Can't pay your bills or save for retirement, can't deal with a $400 emergency, but you sure can pay those taxes!! USA fuck ya.

slightlyskeptical's picture

And who has a finanacial interest in student loan collection firms? Believe it or not it is madam Secretary of Education DeVos.

Txpl9421's picture

In the private sector you can buy collection services that will hound these kids to hell for a lot less than $38.

Ruin the credit, ruin their reputation. That's part of the fun of collections. Post their names online for everyone to search. Attach liens on cars, houses, parent houses...

Just like the government. They fuck up collections.

mary mary's picture

Maybe ANTIFA should organize against the debt collectors.

Didn't people USED TO go after those who were annoying them, instead of after third parties who were not even in the game?

are we there yet's picture

Not all people are created equal intellectually. Many are incapable of higher learning and should not get a student loan for a degree they have no real hope of getting. Even more important, not all degree subjects have equal earning potential to pay back the student loan. Social studies, political science, Swahili, majors are worthless degrees. Also, accounting and law degree graduates in the bottom of their class will never be hired by the big accounting and law firms.

smallbedbug's picture

No problem, increase income tax on people making over 75k a year to pay for the loans.

hardmedicine's picture

GOD DAMN COMMUNIST!!!  who let them in here?

Golden Showers's picture

We just need some Monday night Rehabilitation for these debtors.

https://www.youtube.com/watch?v=cLts-sXlLEM

kwaremont's picture

Once establishment realized the Great Generational Fraud called the pension system (namely PAY AS YOU GO) is broken and the debts of social state obligations are at the level of at least 15x GDP, they do not care any more... trillion here, trillion there, does not matter at all whether you cannot pay 5xGDP, 10xGDP or 20xGDP

So, student debt bubble is bursting, let's see what's next. Maybe CDS/CDO on student debt, that would be awesome. Needs some leveraging so that the parasites in the financial mafia system can grab a bit more profit.