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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.
Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation. They keep those funds even if borrowers subsequently default again, contracts show. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.
[...] Officials at the CFPB say the government should reexamine whether the loan program, and the lucrative contracts it bestows on private firms, is working for the millions of Americans struggling to repay their taxpayer-backed student debt.
"When student loan companies know that nearly half of their highest-risk customers will quickly fail, it's time to fix the broken system that makes this possible," said Seth Frotman, the consumer bureau's top student-loan official.
-- submitted from IRC
(Score: 2) by VLM on Monday May 22 2017, @08:11PM
I suspect the population of defaulters is different than the population of income-based-repayment plans.
It seems like all the waitresses and bartenders and substitute teachers heard about income-based from coworkers and they all sign up together etc.
My guess is defaulters are cut from a different cloth and have high school kid jobs (mcdonalds) where the coworkers know nothing about it, or they defaulted not because they don't have income but they got cleaned out in a divorce or medical incident such that their check(s) bounced.
Like the people in the plan are situationally structurally poor as are their coworkers and culturally the income based plans are just part of being a young school teacher, just like signing up for food stamps is part of working at Walmart. I'd theorize the defaulters are people who were doing OK on a normal repayment plan until some kind of event gave them an economic knockout punch and now they don't know what to do.