Among the tasks we can add to the list of things the government does incompetently: hire debt collectors.
More specifically, actually salvaging a part of what they’re already owed.
Billions in tax revenue go unpaid each year, and the IRS themselves are tasked with capturing that lost revenue. They’re actually pretty good at it too, collecting between $8-13 for every $1 spent on enforcement among those who evaded taxes.
However, when our government acts as lender (as they do in the case of federal student loans), they hire private debt collectors too.
According to the Daily Caller, The U.S. government pays professional debt collecting agencies, on average, nearly 40 times the value of what they collect, according to joint research released Tuesday from the Consumer Financial Protections Bureau and government filings.
The federal government is annually dolling out an average of $1 billion to debt collectors to retrieve borrowers’ delinquent debt, Bloomberg reports. Of course, it is American taxpayers, not the government, that are shouldering this hefty sum.
Currently, the government is particularly interested in retrieving outstanding student loan debt. Student loans are one of the most common and largest forms of borrowing in recent years, as families still hold to the belief that a college education is necessary for achieving the “American Dream.”
Nearly 8 million Americans holding some $137 billion in federal student loans are at least 360 days delinquent on their payments. That figure is roughly equivalent to the number of people who lost their homes after the housing market collapse of 2007, according to The National Center for Policy Analysis. Another 3 million owing $88 billion are over a month late on their payments.
The problem is unlikely to improve anytime soon, as the majority of those who default on student loans are among those with weak credit, according to new research by economists at The Federal Reserve Bank.
So let’s just review that again…the government pays FORTY DOLLARS for every ONE dollar debt collectors retrieve.
In other words, the government isn’t actually salvaging any lost money. They’re somehow managing to lose more money than if they simply did nothing and just let delinquent borrowers keep on not paying.