As reported by the ABI Fifteen former students announced on Monday that they’d had enough of their student loan debt debacle and were going on a “debt strike” until the government canceled their student loans, Bloomberg News reported yesterday. The “Corinthian 15” took out federal loans to attend colleges run by Corinthian Colleges, a for-profit company that has agreed to close or sell all of its schools amid investigations into wrongdoing by multiple state attorneys general.
The campaign peels the cover off a long-simmering headache for the Department of Education, which has forgiven most of the private loans that Corinthian sold students, but has not granted relief to the people who owe the government for their time at the disgraced for-profit colleges.
Refusing to pony up on student loans is a tactic that has grabbed headlines, but is unlikely to result in any relief for students, and may even make things worse, experts say. “They are taking a huge risk,” says Robyn Smith, a lawyer with the National Consumer Law Center.
Smith continued, “Not only will [a default] affect their credit report, but the government has draconian debt-collection abilities.” When someone goes into default on their student loans — meaning they have failed to make payments for at least 270 days — the government can skim money from their tax return and wages to repay the loan. The government can also charge the borrower collection fees of up to 25 percent of the interest and principal of the loan, says Smith, adding to an ever-expanding pile of debt. About a quarter of Americans whose student loans became due in the last decade have gone into default, according to the Federal Reserve Bank of New York.