January 16, 2014 — Report

Student loan debt levels keep growing. There are nearly 39 million borrowers carrying over $1 trillion in federal student loan debt. About $120 billion of federal student loan debt was delinquent in 2012 — a 30.5% increase from fiscal year 2011.

Most borrowers fall behind on student loan payments because they are unable to complete their educations, suffer from serious disabilities, or earn so little money that they cannot afford to repay their loans. The stakes are high for borrowers due to draconian government collection powers, including seizure of earned income tax credits and Social Security payments. Even those who can make some payments face serious damage to their credit reports or ability to get credit for critical purchases such as cars and homes.

The burdens on borrowers also create once in a lifetime business opportunities for servicers,
collectors, and other private companies:

“The student loan market is a $1 trillion opportunity for the ARM [debt collection] industry that is not going to decline anytime soon.”

Mark Russell, “Student Loans: The ARM Industry’s New Oil Well?” Inside ARM (Oct. 20, 2011)

Sallie Mae is the biggest player of all, with connections to every aspect of the student loan industry. President Nixon created the Student Loan Marketing Association, or “Sallie Mae” — a government sponsored enterprise (GSE) empowered by the government to use U.S. Treasury money to buy government-backed student loans from banks. The motivation was to free up funds for the banks to make more loans.