In the Student Loan Debt Crisis, the Debt Collectors are the Real Winners
Recently NBC San Diego interviewed me and senior member of the House Education and Workforce Committee, Congresswoman Susan Davis, for the investigative report “Student Loan Programs to Help Borrowers Costing Taxpayers” to discuss the student loan debt crisis.
In the Student Loan Debt Crisis, the Debt Collectors are the Real Winners
According to the Federal Reserve Bank of NY, 44 million are living with student loan debt. And of that, the Department of Education says that 8 million people have given up on paying $137 million in debt. When a student loan debt borrower misses making student loan payments for 9 months, then they are considered in “default”. There are student loan programs to help those borrowers in the student loan debt crisis. The Consumer Financial Protection Bureau reports that within 3 years nearly half of those who defaulted on student loans and then worked to get back in good standing — will default again in 3 years. But that isn’t even the worst part.
As I said in the NBC segment regarding the student loan debt crisis, “it’s a broken system”. The Department of Education pays debt collectors up to $1,710 for each student loan borrower they try to get out of default and back in good standing. Many of the loan rehabilitation programs only require students to pay $5/month to get back into good standing. That is $45 over a 9-month period. So in essence, the debt collector is paid around $1,710 to recoup $45. And the debt collector can keep these fees even in the borrower defaults again. As NBC reports, the Department of Education spends $38 to collect $1 of student.
There are income-based repayment plans that can get borrowers down to $0 payments after they are out of default and back in good standing — but 90 percent of borrowers who get back in good standing aren’t enrolling in these programs. The reason isn’t completely clear, considering all that needs to be done is paperwork by the loan servicers to confirm the borrower’s income. As Congresswoman Susan Davis stated, “we have to look at how the loans are set up and why students aren’t able to resolve them more efficiently.”
The student loan debt crisis needs some to be fixed, or at least improved upon at the very least. According to NBC, Congresswoman “Davis, along with Reps. John Sarbanes (D-Md.), Gregory W. Meeks (D-N.Y.), and Raúl M. Grijalva (D-Ariz.) has called on U.S. Education Secretary Betsy DeVos to review the Department of Education’s Public Service Loan Forgiveness (PSLF) program.” So far she has not received a response from Secretary DeVos.
The student loan debt crisis is very difficult to navigate. If you need student loan debt help, give me a call at 858–217–5051 and we can go over your debt relief options in a free consultation. Or ask me a question via the “Ask a Debt Question” page of my website. I am in the business of helping consumers in debt and saving them money. Unlike many debt settlement companies who take advantage of those in distressed situations, as an attorney I am held to moral and ethical standards set up by the legal system. With my own law school student loans, I have been where my clients are and understand that student loans are a huge financial burden. Read my student loan client success stories to learn about those affected by the student loan debt crisis who are now free from the anxiety of their student loan debt.
Story originally published on GamezLawFirm.com. Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego and Los Angeles. For more information, please contact Daniel Gamez at 858–217–5051, daniel@gamezlawfirm.com or use our online contact form. Stay updated about the latest debt relief tips by following on Facebook and Twitter and read about client success stories on our website.
