There are various ways of collecting debt. Wiping out a trillion dollars of debt owed by largely middle-class folks is totally uncalled for.
That will leave the poor taxpayer schlubs who didn’t spend educationally beyond their means to pay for those who did.
Where did I say ‘wipe out a trillion dollars of debt’?
You are free to disagree with me, even vigorously disagree. But, do *not* twist my words.
What I said was we have to write *some* of it off. There are times when collection costs exceed the balance due. Anyone with business experience understands that.
The way the repayment system is structured right now is gentle on borrowers, but, very cumbersome. It’s costing us a lot of money to send out bills every month for $0, or $15, or $35 payments. All of those payments have to be processed, posted, and, hopefully; you get the idea.
Much of the evaluating and collecting is now being done by private companies, eg NelNet, Naviant, etc, under contract with the government. They’re somewhat more efficient. They take a cut of every cent collected. Thus, they have to be monitored closely to make sure they aren’t hinking the numbers. They have every incentive to stick borrowers with a higher payment that that for which they are eligible. It happens, collection agents being what they are.
There was a push a few years ago to fix the massive default rate. Hence, the kinder, gentler collection process. There are now two pathways out of default: rehabilitation or consolidation. The differences are not important for our purposes.
In either case, the borrower makes a determined payment to a collection agency for either six or nine months. At the end of that term, the default is *cured*. The loan is then transferred to another collection agency, aka *servicer* in regular repayment status.
The big carrot on the end of the stick for borrowers is FICO. Depending on whether the borrower went rehab or consolidation, their FICO is affected. If the loan is rehabbed, the default is completely removed. If it’s consolidated, the default remains, but shows as “current”.
What nobody tells borrowers is that when their loans go into regular repayment status, they show up on their credit reports as brand new debt.
That is the student loan collection process as it currently stands. A lot goes into calculating and monitoring incomes to establish repayment amounts. President Trump’s 12% would streamline that.
Trump would also take out the taxpayer subsidies of the “public service” borrowers who get their loans forgiven.
The goal of all this was *not* to recoup taxpayer money. Congress is well aware that will never happen.
They wanted to be able to wave a bunch of numbers around and boast about how many defaults they cured. That foams the runway for more funding.
no taxpayer payment.
take assets from the eduction industrial complex
It will pay it off within a year.