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Published On: Tue, Jun 6th, 2017

The Government Can’t Handle Student Loan Debt Collection

In recent days, it has been discovered that American taxpayers are paying $38 to collect just $1 of student loan debt–this is according to Bloomberg analysis. Of course, with the student loan debt at over $1.3 trillion–it is prime time for debt collection. This is especially true since around 11 percent of aggregate student loan debt is 90 or more days delinquent or in default. Unfortunately, debt collection tactics are not producing results.

Bloomberg’s Shaien Nasiripour said, “If a borrower subsequently makes nine on-time monthly payments of as little as $5 during a 10-month period, their loans are returned to good standing and the default is supposed to be wiped from their credit reports.”

Image/bykst via pixabay

Shocking numbers

According to a CFPB report, around 30 percent who went through the government debt rehabilitation program defaulted once again within two years. In addition, around 40 percent defaulted in three years. Only in the government is it acceptable to spend $38 to collect $1.

If a private company did this, it would quickly go bankrupt. This is why debt collection should be left to the private sector. A lot of time is being wasted tracking down former students who have changed their contact information.

To illustrate, one effective process to use is skip-tracing, or locating the intended recipient. What is skip-tracing? This is a process of locating debtors who no longer have accurate contact information. Some strategies used include checking phone books to canvassing public and private data.

Changing numbers

Since the nation has over $1.3 trillion in student loan debt, you can be certain there are debtors who have skipped out on their responsibilities. The debt is burdensome not just to the debtors, but also to the nation. When people have the heavy cloud of debt over them, they are less likely to spend that money elsewhere.

Get it paid

The sooner the debt is paid off, the better. When the debt goes into default, often the debtor has just pushed it aside and forgotten about it. The process of debt repayment is never easy, especially if you are struggling to pay your day-to-day bills. Yet, living in debt is no way to live. The only way to achieve true piece of mind is to eliminate and pay off your debt, one way or another.

Use the right methods

Skip-tracing is a critical element of the debt collection process. If debtors understand that debts are meant to be repaid, they will be much more thoughtful with regard to taking out loans in the future.

Bloomberg also reported, “The federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.”

It seems that debt collection needs to be placed in someone else’s hands. What the government is currently doing isn’t working too well. There are many much more effective private companies who are well-trained in cost-effective tactics for collecting on debts.

Author: Carmelo Hannity

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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