Student Loans in Default and Debt Collection
The number of student loan defaults has become critical across the nation!
June 16, 2003 — MINNEAPOLIS, MN – Across the nation, college graduates are throwing parties, sending out swarms of resumes, and preparing for their futures. However, within this commotion of dreams and aspirations, many students overlook one crucial factor-how are they going to pay off their student loans?
“Unfortunately, many recent graduates are accepting jobs below their income requirements due to stagnant growth of business and job opportunities,” said Gary Williams, president-elect for ACA International, the Association of Credit and Collection Professionals, whose agency has collected over $50 million for 450 colleges and universities across the nation. “Due to this and other acquired living costs, former students are having trouble completing their financial obligations to their institutions on time
In 2002, the average public school student left college with $17,000 in student loan debt, and the average private school student left college with $21,200 in student loan debt. Today, that number is $30,000.
With undergraduate student loan debt steadily increasing in recent years, the U.S. Department of Education and other higher-education institutions have contracted with private collection agencies to collect delinquent student loans.
On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years. For a baby born today, this means that college costs will be more than three times current rates when the child matriculates in college.
“With the cost of college increasing, many students are left with only one option-to take out a loan,” Williams said. “However, some of these same students are also unprepared to pay off the loan for various reasons, causing the burden to fall back on the institution.
In 2001, collection agencies recovered $780 million in delinquent debt, and in 2016 that number jumped to $8.7 billion for the Department of Education.
The following tips from ACA International can help students pay off their loans on time:
Save – Well, before graduation, open a savings account for student loan money only. Decide how much money you can afford to put away each month and stick to it. Just think- during four years of schooling, if you put away just $30 every month, by the end of college, you will have almost $1,500 saved for your student loans.
Budget – Many college graduates exceed their cost of living. Therefore, ACA suggests developing a budget and sticking to it. Determine what bills have to get paid (i.e., student loans, rent) and then calculate what you have leftover for savings and additional expenses (i.e., cable).
Ask for advice – Don’t hesitate to ask your student loan representative or collector for a flexible payment plan. Most organizations are willing to develop a payment schedule that works for both the consumer and the lender.
ACA International, formerly known as the American Collectors Association Inc., is the association of credit and collection professionals. Founded in 1939, ACA International has over 5,000 members, including third-party collection agencies, attorneys, credit grantors, and vendor affiliates. Headquartered in Minneapolis, ACA International serves members in the United States, Canada, and 58 other countries worldwide.