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Justice Department Seeks Repayment Of Delinquent Student Loans.
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The federal Department of Education is turning to the Justice Department more often in recent years in a bid to collect delinquent student loans.
Figures from U.S. District Court in Columbus show collections activity on delinquent student loans began to spike five years ago when the number of cases jumped from three in 2006 to 50 in 2007. During January and February of this year, 12 cases have been referred to the U.S. attorney’s office in Columbus. If that pace continues, more than 70 civil suits are likely this year.
“Its not difficult to get a judgment on a student loan debt.”
Deborah Sanders is coordinator of the collections unit at the U.S. attorney’s office in Columbus. Recently, she says the court is only receiving referrals from the Department of Education when $45,000 or more is owed.
“Larger student loan cases that were usually the consolidation loans where a debtor has several old student loans and they’ve consolidated and then they’ve defaulted on that consolidation loan,” Sanders says.
In a half dozen 2011 cases reviewed by WOSU, most of the amounts being sought top six figures. For example, a Knox County resident owes $218,000. A Columbus woman who declined to be interviewed owes $126,000, plus interest that accumulates at the rate of $377 per month. Prosecutors seek $115,000 in student loans from an Upper Arlington man and more than $100,000 dollars from a former student in Fredericktown. And Sanders says most student debt cannot be cleared through personal bankruptcy.
“There is not very many defenses against student loans. So the cases move relatively quickly.”
At Ohio University, sociologist Deborah Thorne studies trends in personal debt. Thorne says it’s unlikely the federal government will recover the full amounts owed when defaults are in in excess of $100,000.
“This is unsustainable, you can’t continue to saddle so many people in our country with this much debt. Its not $10,000, which is about the average amount that’s on a credit card. We’re talking 25 grand that is the average amount that these people are carrying.”
Graduating college seniors, on average, now carry about $25,000 in student loan debt. Thorne says most students are not financially skilled enough at age 18 or 20 to grasp the consequences of so much debt. So Thorne has begun carving out class time to illustrate the long-term effects of so much debt.
“I map out, OK this is how much student loan debt you have. Let’s pull up a Sallie Mae calculator here and how much are your payments going to be. If the average in your field is 30,000 bucks a year. Take off how much you pay in taxes and lo and behold, you’re in poverty. And they don’t know that they’re going to be able to make their loan payment so they’re frightened and they’re very angry.”
When it comes time to pay back student loans, borrowers often have access to deferments or extended grace periods. But if a federal court judgement is filed to collect a student loan, Sanders says lenders can garnish wages, put liens on a person’s property and confiscate any federal tax refunds.