Student loan crisis getting worse
You didn't think it was possible, did you? This CNBC article details how the snowball keeps picking up steam as it rolls downhill, threatening to crush the entire student loan program:
Student-loan defaults surged in the first three months of 2013, while efforts to collect bad loans are faltering, according to credit analysts and government audits. It is the latest twist in a college debt crisis that is hanging over recent graduates and dragging on the broader economy.
Credit-rating firm Equifax said $3.5 billion in government and private student loans went bad in the first three months of 2013, the most since the company began keeping track. The U.S. Department of Education said 6.8 million federal student loan borrowers are now in default, representing $85 billion in debt. And the department's systems for collecting the bad loans are struggling to keep up.
The Department's Office of Inspector General found in December that more than $1.1 billion in defaulted student loans were stuck in a sort of computer limbo.
"The Department is not pursuing collection remedies and borrowers are unable to take steps to remove their loans from default status," wrote Assistant Inspector General for Audit Patrick Howard in the December 13 report, which blames a system installed in 2011 by Xerox that is supposed to transfer defaulted loan accounts from servicing companies to private collection agencies. Those collection firms have considerable power, including the ability to garnish up to 15 percent of a borrower's wages. But none of that can happen until the accounts are transferred.
A Xerox spokesman declined to comment, referring inquiries to the Department of Education.
"While we regret this delay, we are taking active steps to work with the vendor to resolve the problem," Department of Education spokesman Chris Greene said in an e-mail. He denied that borrowers who have cleared up their defaults are not being removed from defaulted status, but acknowledged "a small percentage" of bad loans have been caught up in the problem.
He said some $600 million of the affected loans will be transferred "in the coming weeks."
Eventually, you and I are going to foot the bill to bailout these scofflaws and it won't be cheap. Do you think then that they'll reform the program or will they just throw good money after bad?
What posseses an 18 year old to saddle himself with $100,000 in debt in the first place? Do philosophy majors really think they're going to be able to pay that loan off?