Taxpayers Fund $454,000 Pay for a Collector Chasing Student Loans

www.bloomberg.com...

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.

Yes they owe the loan but the collection procedure seems a bit harsh (no court order) and the collector has a very poor incentive to pursue counseling.

Rarely discharged thru bankruptcy!!! How did the lawyers let that get into the student loan law?

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?

The whole college system is a big scam.

reply to post by poet1b


Thats exactly what I was thinking too.

Interest is a scam, More so on Student loan debt the mere fact they are willing to give away over a third of it is proof.

earning money from essentially nothing, its the promise of future wealth based off making money from keeping someone else poorer who was desperate in the first place to get out of their situation by getting an education to better their situation...

reply to post by benrl


There is was an article put out by Harpers some years back that claimed that banking and investment take a 40% bite out of our economy, and they do nothing in return for that money as far as I am concerned.

We need to re-instate usury laws to establish a max chargeable interest rate below 15%.

Banks exist on a special charter that gives them privileges, and for that very reason they should be heavily regulated.

With the internet, the cost of a college education should have dropped tremendously, and what we see is just the opposite. There is should be standards developed in order to meet a degree, and online course offered for free. Charge for grading papers and taking tests, charges which should be pretty small, so that it is much easier for people to obtain a college degree, even with kids and mortgages and such.

It makes more sense to invest that 37% into the student to begin with, maybe they'd need smaller or no loans? Plus we can get an educated productive American who spends a life time injecting money into the economy as opposed to repaying a bank. Maybe that just makes too much sense though.

reply to post by poet1b

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?

But that's socialism, better watch out the 'free market capitalists' will be here shortly nipping at your shins for that comment!

Even with guaranteed student loans people can't afford college and needing 20 to 30 years to pay off an education debt is just part of the American dream nightmare.

It's the American dream... Anyone can be rich, providing your parents are, well... rich!
The fact students are being treated worse than those than credit debt shows what a corrupt, corporate "democracy" the US has become. You can help fight against this by A voting (it encourages others to do the same) and B not voting for Demo-Rep (it encourages others to vote for democracy too). At the end of the day i'd rather be the first person to vote for a party, than the 10,000 to achieve someone i don't know, and probably would be (in reality) better of not knowing, a majority.

Misleading headline, the money made is a commission for amount collected. The taxpayer actually collects almost 70% of the amount owed.

reply to post by babybunnies


Read the very first sentence in the OP again.