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US steps up enforcement of delinquent student loans

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Your rich Uncle Sam is calling in his chips.

The U.S. government stepped up collections on delinquent student debt to $2.9 billion last year -- or an average of $1,000 from 2.9 million former students and their cosigners, according to the Treasury Department. And the trend continues. In the first six months of fiscal 2019, which started Oct. 1, collections totaled $3.3 billion.

Graduating students are usually granted a six-month grace period before making loan payments. Hypothetically, a member of the Class of 2019 with $50,000 in loans would owe about $550 per month over the next decade -- or $20 daily. (Assuming 6% annual interest and a 10-year term.)

The debt load is causing anguish that goes far beyond financial concerns. One in 15 borrowers has considered suicide due to their school loans, according to a survey of 829 people conducted last month by Student Loan Planner, a debt advisory group.

The Consumer Financial Protection Bureau said it's received 2,475 complaints from borrowers about the government's collection efforts since the start of 2018, including:

- "They call me daily, have called my brother, my father, my ex-brother-in-law, my current brother-in-law, and my ex-husband. They have told these individuals that they were trying to locate me for repayment of a student loan. "

- "Called my wife --five times in three minutes -- son, brother- and sister- in-law -- not even same last name -- to tell me to pay."

- "They've contacted my neighbors, my siblings, my sister-in-law 's parents, and engaged in harassing phone calls."

Adding complaints from lenders other than the government would more than double the total.

The Treasury Department may withhold federal income tax refunds, Social Security payments (including Social Security disability benefits) and more:

- State tax refunds may be also withheld and applied toward repayment of a loan.State drivers licenses or other state-issued licenses may be confiscated.

- A borrower's employer may be ordered to withhold up to 15% of disposable pay to collect defaulted debt without a court hearing.Withholding "garnishment" continues until a defaulted loan is paid in full or removed from default.

- Costs associated with collecting defaulted federal student loans, including the cost of placing a loan with a private collection agency, can also be added to the balance due.Collection costs such as processing fees and costs associated with potential civil litigation can also be added.

This article was written by Alex Tanzi, a reporter for Bloomberg.

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