Student loans in default to be referred to debt collection, Dept of Ed says

https://apnews.com/article/student-loan-debt-default-collection-fa6498bf519e0d50f2cd80166faef32a

34•mystraline•3h ago

Comments

josefritzishere•3h ago

There is an element of sadism in this sort of behavior.

hiatus•3h ago

Holding people accountable for their choices is sadistic?

throw-the-towel•2h ago

I'm not American so I may have missed something, but isn't this a huge departure from established procedures which everyone was relying on?

flerchin•2h ago

If anything, this is a return to normalcy.

hiatus•2h ago

No. The loans were deferred for a few years. When people took out the loans they did so knowing they would have to pay them back

0xfaded•2h ago

Understood as 18 year olds who were told everything would be okay so long as they just did what they were told.

I was lucky enough to grow up and go to university in another country. The magnitude of the financial decisions I was making at the time were < 1k and I remembered how much money that felt like.

IMHO blaming people for 100k bad financial decisions made under duress just as they entered adulthood is victim blaming.

nyarlathotep_•1h ago

> IMHO blaming people for 100k bad financial decisions made under duress just as they entered adulthood is victim blaming.

Especially when the implied social contract broke down--i.e low wages, horrific increases in the cost of living, limited opportunities.

It's pretty common to find people that regret taking the loans to go to school and got little value from their education.

ru552•2h ago

They only stopped referring to debt collections in 2020 when Covid hit.

toomuchtodo•2h ago

The debt isn’t real, it could be forgiven. If moral hazard wins, those who can will continue to leave the country, those who can’t will pay this tax, diminishing economic output, and less people will go to college in the future.

If we’re going to keep speed running the decline of the US, it’s a fine strategy. The people making these choices will be long dead by the time the consequences arrive.

andsoitis•2h ago

> The debt isn’t real,

How come?

toomuchtodo•2h ago

You’re asking how a line item in a database isn’t real?

hiatus•2h ago

Why not send me $100k then? It's just a line in a database after all.

toomuchtodo•2h ago

Did you incur that debt because your country is dysfunctional, doesn’t provide education at a reasonable cost, and you were told it was the only path to a good job? Probably not.

[argument withdrawn]

hiatus•2h ago

I have plenty of friends that graduated from state schools and incurred no debt, all in the US. Does that invalidate your points about the inability to get an education at a reasonable cost?

> I’m sure you’d have no problem burning millions of dollars of VC funding on a low value business idea, as if that would be of superior economic value.

You know absolutely nothing about me.

justinrubek•2h ago

State schools aren't some magical catch all free education place. You might know some people who pulled it off but there are a lot of us that didn't.

hiatus•2h ago

I know several people that went to school in NJ. I just looked up the costs and it's < $10k/year. That's pretty reasonable and NJ is a high cost of living state. No one said there is a magical catch all.

bdcravens•2h ago

Isn't your paycheck a line item in your employer's database?

toomuchtodo•2h ago

My employer is not a nation state or central bank.

hiatus•2h ago

It's clear you are just trolling. By your logic, federal employees shouldn't get paid, since their salaries are just lines in the government ledger.

toomuchtodo•2h ago

Arguing discharging debt not originated in good faith is not trolling. My argument is this debt could be discharged without ill effect, to not to is a choice (and a poor choice at that, with economic consequences).

Debt is not written in stone. It is always negotiable, and only sometimes enforceable. There is no morality around debt, so I’m unsure why the strong feels around why this debt can’t be forgiven or renegotiated.

https://en.wikipedia.org/wiki/Debt:_The_First_5,000_Years

ezfe•2h ago

Debt is only real if someone is out that money.

el-berg•2h ago

IMO the cost and value of college have long since diverged. Colleges and creditors are colluding and, unfortunately, many borrowers feel they have no choice but to participate in this sick game.

bdcravens•2h ago

Perhaps all college, college housing, and college dining plans should be free, but until that time happens, I don't understand this argument.

techpineapple•2h ago

Sometimes, yes, depends on the context.

enraged_camel•2h ago

Doing it while knowing that it will absolutely wreck them is, yes. Not to mention doing it with such short notice, and when we're on the verge of what will most likely be a serious recession.

tacticalturtle•2h ago

This has been the plan for months, even during the Biden administration - the plan was to restart in 2025:

> “Involuntary collections will not occur before 2025," a White House spokesperson said in a statement. "Defaulted borrowers won’t see collections until 2025.”

https://subscriber.politicopro.com/article/2024/10/biden-adm...

smileson2•2h ago

not a one way street

dfedbeef•2h ago

Careful what you wish for

hiatus•2h ago

What do you think I am wishing for, exactly?

dfedbeef•2h ago

Accountability?

hiatus•2h ago

I am not worried in the slightest.

disambiguation•2h ago

Which choice is that - pursuing higher education to have a better life, or being unemployed? What would be your advice to them, what should they have done differently?

hiatus•2h ago

Go to a state school. Go to community college first. Enter a trade.

fnordpiglet•2h ago

None of these are free or cheap, and I’ll wager bottom dollar the majority of debt holders went to a public school of some sort. In fact student debt is most pernicious for people of lesser means and fewer opportunities, and who most need the debt to make it possible to go to school. These are also the people who are most incentivized to leverage public schools. (Quick google shows 62% of debt is held by public school attendees)

hiatus•2h ago

State school attendees face lower debt burdens than private for-profit schools. I can't find the data you are referring to that 62% of student loan debt is incurred by state school attendees. By these numbers [1], only 40% of public school attendees even incurred debt.

[1]: https://www.bestcolleges.com/research/average-student-loan-d...

tacticalturtle•2h ago

In my state (Massachusetts) community college is in fact free.

In other states, for example Texas, it’s a little over $3000 a year on average for in state:

https://www.communitycollegereview.com/tuition-stats/texas#:...

That’s much cheaper than the tens of thousands for a public 4 year university.

And we should point out that for trades, you are getting paid in an apprenticeship. That’s better than cheap or free.

disambiguation•1h ago

I want you to honestly think back to 17 when you had to make this choice - did you make it alone? How many of your peers were aware of the financial risk they were taking?

hiatus•1h ago

I'm probably not a good example. I thought to myself, "am I living my life for myself or for other people?" and dropped out of school after my first year.

hayst4ck•2h ago

I've rarely had my hate spiked so highly so quickly by a comment.

Many of these loans are handed out predatorily to people classified as children, 6-8 years before their higher level thinking pre-frontal cortex fully develops, with no life experience, little work experience, a wide range in quality of parenting and childhood, with a society that has said "this is how you achieve the American dream of doing better than your parents."

The loans themselves shield the lender from consequences and put risk squarely on the the loan taker.

The seeming goal of these loans being the same for most of the structure of American society, to ensure desperate workers that have no freedom and no ability to say no to businesses.

When society offered these loans to people who in no way would have been able to get them on fundamentals, which was already a failure of society to invest in the future, there was an implicit promise that they would lead to a better life and they didn't.

You can't blame societies young for believing what their elders and even society at large tells them.

Universities failed their students, society failed students and universities, our own culture decayed in terms of earning vs receiving credentials, and the people you want to pay the cost of that are the people that the system victimized the most?

Ekaros•1h ago

Maybe then ban giving them out for anyone under age of 25. Absolute total ban. Start solving the problem today. Anyone currently taking loans do not get any more of them until age of 25.

Seems like most reasonable first step to take.

toomuchtodo•1h ago

Requires Congress to act, which will not occur in its current configuration. If what is reasonable is impossible, it's only a thought experiment. Can consider trying again after midterms in 2026, depending on outcome.

piva00•1h ago

Unreasonable if there are no alternatives to achieve higher education. You start solving the problem by cutting potential opportunities without no replacement scheme for it, only creating bigger problems.

There's no easy solution to this, it's structural, it's systemic, the model the USA uses for higher-ed funding is structurally unsound and unsustainable. Replacement the model can only be done through a measured policy change but I don't see much of that coming from the US in the past 10-15 years, it's mostly flailing around with no clear vision for what it wants to be in the future, just an everlasting chase for GDP growth no matter how, at some point this narrow objective comes crashing down.

hayst4ck•1h ago

A social movement where everyone decides not to pay any form of debt has a higher chance of success than getting congress to act, especially act in the interest of people rather than the interest of bankers, corporations, or oligarchs.

We don't make people take out loans for K-12. Education is an investment. It should be funded, just not in a way that is so rife with conflicts of interest. Everyone benefits from an educated society except priests and other kinds of authoritarians.

hiatus•30m ago

Hate? Maybe close the browser and go outside. Plenty of people were presented with the same information and options and made different choices and sacrifices.

bdcravens•2h ago

This is merely lifting the moratorium on collections that was put into place during COVID, as in, debt collection on student loans isn't a new thing.

mingus88•2h ago

And the obvious question that another poster has raised is why are all the COVID era loans being forgiven then? Shouldn’t all loans be collected?

Could it be that many in DC benefited from that free money, and are also benefitting from the status quo of unaffordable education?

bsnnkv•2h ago

It's morbidly fascinating to watch the wanton cruelty of a society in such rapid decline.

conception•2h ago

“Less than 40% of all borrowers are current on their student loans, department officials said.”

Hello, 2008, my old friend I've come to talk with you again…

righthand•2h ago

Why do college students have to continue to pay back their loans when the legislature is bipartisanly comfortable writing off $50k+ PPP day loans per business from Covid Pandemic? [0]

[0] https://pppreport.org/

Joker_vD•2h ago

Because the legislature is not bipartisanly comfortable with writing off the student loans. Duh.

monocularvision•2h ago

Because that program was designed from the beginning to be forgiven. It was about keeping businesses afloat during extraordinary times and keep paychecks going to folks. People who compare student loan forgiveness to PPP are not making a good faith argument.

Volundr•1h ago

It certainly wasn't sold to the public as "these are going to be forgiven". After all they are called loans not grants. And given all the retoric around "it's simple you took out a loan, now you pay it back" or "why should my tax dollars pay for your loan forgiveness" I think it's very fair to why this logic applies to people not businesses.

monocularvision•1h ago

It was literally in the bill when it passed! What are you talking about? I very distinctly remember this being promoted as part of the package.

The deal was “if a business spends a percentage this money on payroll, it will be forgive”. It was designed to keep businesses afloat for a set amount of time as we locked down for COVID.

Y_Y•2h ago

It may also be a factor that the student loans cannot be discharged through bankruptcy. The government may be afraid of (even scammy) businesses shutting down, but there's no danger with student-debtors.

ecshafer•2h ago

Members of congress as a class took a lot of said ppp loans foe their “businesses”. They dont have a lot of student loans debt.

tboyd47•2h ago

The straightforward, blunt answer is that the financial economy depends on having a class of high-earning people who are on the hook for paying a lot of interest and unable to get out of it.

hayst4ck•1h ago

There are two fundamental belief systems about truth.

One is based on reason, where people look for contradictions (like you're doing right now) in order to better understand truth.

The other is based on authority or faith, where people look to authority figures, such as parents, priests, pundits, or politicians, in order to understand "truth".

These are incompatible. You can't point out contradictions to an authority oriented person and expect them to care. While you are using your words, they have already made off with the money. Your reason got you nowhere, while their power got them $50k+ loans. They could do what they did with action while you are soothing yourself with words.

One thing authority oriented people understand is that actions matter most and that the highest truth is found within action on the physical world.

rgbrenner•2h ago

unlike other loans sent to collections, collection costs are added to the loan. the amount varies by loan type, but it’s typically 25%. so for example, if you owe 50k: you miss a few payments, and put into default, the loan is sold.. and you immediately owe 62.5k. they can then start garnishing wages and any tax refunds based on this amount.

Molitor5901•2h ago

It's like charging prison inmates money for each day they are in prison, which they have to pay when they get out or.. go back to prison.

epsilonaurigae•2h ago

>“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said.

I thought she was only hired to shut it down…

They wouldn’t just lie to us, guys?

Molitor5901•2h ago

The easiest and most expedient way to resolve this issue is to a) freeze interest payments on student loans, so long as b) borrowers make timely, reasonable payments. You can't squeeze blood from a rock and you'll only hurt someone in the process.

iamleppert•2h ago

The US department of Education took my tax return one year for a remaining balance on a loan of less than $1,000. I never knew about it, and had thought I paid everything off. Well, turns out they took almost $4,000 with all their fees, interest such that had been just building and building for several years. No one had ever tried to contact me via phone, email, etc. for years.

The US Department of Education is known for their aggressive collection tactics, including garnishing of wages, taking tax returns and seizing homes and cars. I even heard of a single mother who had her child support taken away because she owed money to a fraudulent vocational school.

The US government is openly hostile to those who do business with them, and to their citizens and should be avoided at all costs.

apercu•2h ago

The US government has seemingly been adversarial to their citizens for a long time. Not just in this, but in extremely onerous and expensive demands, like requiring expatriates to file US taxes - that alone cost me nearly $15,000 over 18 years in tax preparation fees (I'm self-employed).

Further, the FBAR reporting requirements. I have retirement money in Canada that makes no financial sense to divest yet, and I spent 5-6 hours filing an FBAR this year because the online form doesn't support OSX at all, and I simply could not get an Adobe Acrobat Reader to install on Apple silicon, so I had to rebuild a crappy Dell laptop in order to meet my legal requirements.

Now, I get requiring some sort of reporting requirements to stop tax evasion and the like, but the tax filing requirement is not based on anything like net worth, but rather if you are a US citizen you must file (US is one of I think 2 countries in the world with this requirement). And the FBAR requirement is anything up to or over $10k in a foreign bank.

For real?

If I sound like I am complaining, why don't you walk a mile in my moccasins.

#Edit - fixing an autocorrect typo.

Kon-Peki•2h ago

Look, I am definitely NOT making any suggestions here. But you know that debt collectors are using these “lawyer gig worker” platforms to outsource their court appearances, and handing full authority to those outsourced lawyers to do the final negotiations on debt amounts that are entered as court judgements.

Just sayin’

hayst4ck•1h ago

Just like social media is the cigarettes of our generation, student loans will be the "preexisting conditions" of it.

Student loans are an odious conflict of interest. People will hold themselves in disbelief that we offered predatory "no risk" loans to literal children, burdening their entire futures with decisions made before they had the faculties to consider it. The moral hazard of protecting a class of loans from completely irresponsible lending alone is enough before even looking at the consequences for the people who took them.

Then you have second and third order effects... Authoritarians don't consult experts believing they know better so Nth order effects of short sighted policy are authoritarian kryptonite. Nth order effects have a way of asserting themselves into reality and breaking through authoritarian denial about the state of reality and nobody is happy when reality asserts itself.

nancyp•1h ago

College studentsare seen as cancer to the current administration. They used to be sweetheart pawns for the previous administration. This is why financial literacy should be mandatory education in high school so they can make more informed decision while borrowing for college.

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Student loans in default to be referred to debt collection, Dept of Ed says

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