Today we are running the sixth segment of the 15-part series on college-student-loan debt. (Thank you to onlinecolleges.net for putting this together.)
High recovery rates have meant that less is done to prevent default.
The rather intensive methods the government uses to get its money allow it to recoup 80 cents for every dollar that’s owed (though some studies suggest that the rate could be closer to 50 cents on the dollar), much higher than the private lender average of 20 cents per dollar. Critics point to this as a reason that the government often doesn’t do much to help debtors from going into default in the first place. Since the government knows it will recoup a high percentage of its money one way or another, there’s little incentive to expend resources to help borrowers avoid collections.