Defaulted Student Loans Are Lucrative Business for Debt Collectors

Of course, debt collectors always make money because people's loans are in default. But student loan debt appears to be especially attractive for debt collectors, as explained in this article by Andrew Martin. Why? Among other reasons, the government helps debt collectors track down many of the debtors, and it is very hard to discharge student loan debt in bankruptcy. Here's an excerpt from the beginning of Martin's extensive piece:

At a protest last year at New York University, students
called attention to their mounting debt by wearing T-shirts with the
amount they owed scribbled across the front — $90,000, $75,000, $20,000. On the sidelines was a business consultant for the debt collection industry with a different take. “I couldn’t believe the accumulated wealth they represent — for our industry,” the consultant, Jerry Ashton, wrote in a column for a trade publication, “It was lip-smacking.” Though Mr. Ashton says his column was meant to be ironic, it nonetheless
highlighted undeniable truths: many borrowers are struggling to pay off
their student loans, and the debt collection industry is cashing in. As the number of people taking out government-backed student loans has
exploded, so has the number who have fallen at least 12 months behind in
making payments — about 5.9 million people nationwide, up about a third
in the last five years. …In an attempt to recover money on the defaulted loans, the Education
Department paid more than $1.4 billion last fiscal year to collection
agencies and other groups to hunt down defaulters. Hiding from the government is not easy.


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