"In an attempt to recover money on the defaulted loans, the Education Department paid more than $1.4 billion [fiscal year 2011] to collection agencies and other groups to hunt down defaulters.
One woman dropped out with $55,000 in student loans and had changed her phone number three times that year so far. Two of her tax refunds had been "seized, and other debtors have had their paychecks or Social Security payments garnisheed. Over all, the government recoups about 80 cents for every dollar that goes into default — an astounding rate, considering most lenders are lucky to recover 20 cents on the dollar on defaulted credit cards."
She attended a for-profit school and reached the point where she could not obtain more student loans.
Critics "say [their success with collections] has left the government with little incentive to try to prevent defaults in the first place."
Not enough borrowers are choosing income-based repayment, where borrowers repay with 15% of their discretionary spending for 25 years, and the rest is forgiven. Not everyone knows about it. Others simply pay nothing because it is easier. Navient tells me about this each time I visit their website. Later, the article says the repayment was reduced to 10% of discretionary spending.
I have had several people happily tell me they were on an income-based plan. They only paid $50 a month! If they pay for 25 years, they pay a mere $15,000--I have paid down more than that!
One site says the average student loan debt is $28,950. I cannot find an average interest rate, but there are many factors. I found a list of twelve of the most common rates and, without any data on how much was owed at each interest rate, I simply averaged them: 5.19%. After 25 years, their debt would be $71,676.88, but forgiven. If they paid $165.87 a month, which is substantially more, but still possibly less than their cable bill, they would pay it off in 25 years, including $8,625 in interest.
Student loan contracts are the most sought-after for collections agencies.
“If [one] vendor […] has not found a borrower in six months, the department turns the case over to another collection agency.”
Jill Shockley is 36 dropped out of nursing school with over $50,000 in student loans, some of which are in default. Her loan servicer asked her to come up with $600 a month to keep three of her federal loans from going into default. “I have rent, a car payment, [and] insurance”
According to Edmunds.com, the average monthly payment on a new vehicle is $483. If your existing car is trouble-free, that is a potential annual savings of $5,796 by postponing the purchase of a new vehicle.
https://www.edmunds.com/car-news/ave...tudy-says.html
Insurance on a new car might be $117 more than on a used car.
Back to the New York Times article, “Guarantee agencies […] get paid much higher fees for collecting or rehabilitating a defaulted loan.”
Once a Student, Now Dogged by Collection Agencies - NYTimes.com
Quote:
Originally Posted by Xist
I hate to say it, but slots in degree programs should be limited to the number of jobs available. I will be using the second degree to pay off the student loans from the first for some years to come.
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What about requiring liberal arts majors to have a science minor?
As I read through these articles I feel frustrated. I had originally thought there were several articles about why college costs as much as it does, but two articles about how difficult life is for people who do not feel they can fulfill these specific commitments?
Does it even cover students who decide to attend out-of-state instead of in-state, when there are viable options? I had classmates that told stories of students that never applied for residency, and had their parents pay for four years of out-of-state tuition.