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By law, the organizations can receive as much as 37 percent of a borrower’s entire loan amount, half in collection costs and half in taxpayer-funded commissions. ECMC says it typically collects 31 percent, or $7,750 on a $25,000 loan. That’s 31 times what it can make for preventing the default through counseling.
In 2010, ECMC generated $131 million from collections, or about three quarters of its revenue, compared with about $17 million from programs aimed at preventing default.
The company benefits financially from federal student-loan collectors’ powers under U.S. law. Unlike those chasing credit- card borrowers, student-loan collectors can confiscate wages without a court order and seize tax refunds and Social Security checks. There is no statute of limitation on collecting student loans, which are rarely discharged through bankruptcy.
If they reduced the student loan by the amount being paid to the collectors, wouldn't this enable the people to pay back those loans more easily?