At a protest last year at New York University, students called attention to their mounting debt by wearing T-shirts with the amount they owed scribbled across the front -- $90,000, $75,000, $20,000.
On the sidelines was a business consultant for the debt collection industry with a different take. "I couldn't believe the accumulated wealth they represent -- for our industry," the consultant, Jerry Ashton, wrote in a column for a trade publication, InsideARM.com. "It was lip-smacking."
Though Ashton says his column was meant to be ironic, it nonetheless highlighted undeniable truths: Many borrowers are struggling to pay off their student loans, and the debt collection industry is cashing in.
As the number of people taking out government-backed student loans has exploded, so has the number who have fallen at least 12 months behind in making payments -- about 5.9 million people nationwide, up about a third in the last five years.
'Changing my phone number'
In all, nearly one in every six borrowers with a loan balance is in default. The amount of defaulted loans -- $76 billion -- is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities, said a survey of state education officials.
To get the money back, the Department of Education last fiscal year paid more than $1.4 billion to collection agencies and other groups to hunt down defaulters. Hiding from the government is not easy.
"I keep changing my phone number," said Amanda Cordeiro, 29, from Clermont, Fla., who dropped out of college in 2010 and has fielded as many as seven calls a day from debt collectors trying to recover her $55,000 in overdue loans. "In a year, this is probably my fourth phone number."
Unlike private lenders, the federal government has extraordinary tools for collection that it has extended to the collection firms. Cordeiro has had two tax refunds seized, and other debtors have had their paychecks or Social Security payments garnisheed. Over all, the government recoups about 80 cents for every dollar that goes into default -- an astounding rate, considering most lenders are lucky to recover 20 cents on the dollar on defaulted credit cards.
While the recovery rate is impressive, critics say it has left the government with little incentive to try to prevent defaults in the first place.
'Defaults could be averted'
Though there are programs in place to help struggling borrowers, the companies hired to administer federal student loans are not paid enough for lengthy conversations to walk borrowers through the payment options, critics say. One consequence is that a government program called income-based repayment has fallen short of expectations.
Under the program, borrowers pay 15 percent of their discretionary income for up to 25 years, after which the rest of their loan is forgiven. But participation has lagged because borrowers are either not aware of the program or are turned off by its complexity.
"If people were well informed, how many defaults could be averted?" asked Paul Combe, president of American Student Assistance, a loan guarantee agency based in Boston. "We are hurting people here."
For borrowers, the decision to default can be disastrous, ruining their credit and increasing the amount they owe, with penalties up to 25 percent of the balance.
Cordeiro, a single mother, dropped out of Everest College, a profit-making school, 16 credits shy of a bachelor's degree. She said she could not get any more loans to finish. "I get these letters about defaulting, and I get them and throw them in the bin," she said.
Jake Brock, 29, who graduated in 2008 from Keuka College, a private liberal arts school in New York, defaulted in May on a federally guaranteed loan of $8,000. With penalties and accumulated interest, the loan balance is now $13,000, he said. "I just fell behind and couldn't dig myself out," said Brock, who owes a total of $100,000 in student loans.
The average default amount was $17,005 in the 2011 fiscal year. Borrowers who attended profit-making colleges -- about 11 percent of all students -- account for nearly half of defaults, while dropouts were four times as likely as graduates to default. A loan is declared in default when it is delinquent for 360 days.
Unlike credit cards and mortgages, there is no statute of limitations on collecting federally guaranteed student loans. "You are going to pay it, or you are going to die with it," said John Ulzheimer, president of consumer education at SmartCredit.com, a credit monitoring service.