Most US college students hope to land a good job with a high salary after graduation. But for some the reality is very different. Many find themselves faced with insurmountable debt – and a loan industry that’s happy to cash in on their misfortune.
As the number of people taking out government-backed student loans has soared, so has the number of borrowers who have fallen behind in making payments.
Around 5.9 million people nationwide have fallen at least 12 months behind in their payments. This number has grown by a third in the last five years, according to a State Higher Education Finance survey.
Many who can’t repay their loans feel they have no choice but to default. It’s a decision that can be disastrous – ruining a borrower’s credit and increasing the amount they owe. It can also result in penalties of up to 25 per cent of the balance.
Despite the scary consequences, young adults across America have chosen to default on their loans. And that decision has resulted in a cat-and-mouse game with the government.
“I keep changing my phone number. In a year, this is probably my fourth phone number,” former student Amanda Cordeiro told the New York Times.
Cordeiro receives up to seven calls a day from debt collectors attempting to recover her $55,000 in overdue student loans. But phone calls are just the beginning.
Since the federal government imposes no statute of limitations for collecting loan repayments, escaping the debt is nearly impossible.
“You are going to pay it, or you are going to die with it,” said John Ulzheimer, president of consumer education at SmartCredit.com.
As America’s poor economy causes companies and small businesses to close their doors, the debt collection industry is booming.
Conserve, a debt collection agency in New York, expects to double its payroll in the next three years.
“There is great opportunity,” the company’s president and founder Mark E. Davitt, told the New York Times.
It’s easy to see where that opportunity comes from.