NCPA - National Center for Policy Analysis

Default Cases To Collect Student Loans Skyrocketing

April 20, 1999

The Justice Department is filing thousands of cases against former students who have defaulted on their college tuition loans. The surge in filings comes as Congress has put pressure on the Education Department to be more aggressive in its collection efforts.

  • During the last fiscal year, Justice filed 14,080 default cases in federal courts -- a 55 percent increase in filings over 1997.
  • As recently as 1995, there were just 1,142 student loan default cases filed throughout the country.
  • The default rate peaked at 22 percent in 1990 and declined to less than 10 percent in 1996.
  • There are currently 59.6 million outstanding student loans totaling $152.7 billion -- of which 13.3 million worth $26.7 billion are in default.

The average loan in default is about $2,000.

A few years ago, Congress eliminated a six-year statute of limitations on bad student loans, allowing collection agencies to go after longtime debtors who may have thought they had successfully converted their loan into an outright government grant.

The Department of Education now contracts with 17 collection agencies to go after debtors. The agencies keep about 23 cents on each dollar they collect. If their efforts are unsuccessful, the Justice Department is called in.

Source: Edward Walsh, "Lawsuits Over Student Loans Rise," Washington Post, April 19, 1999.


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