Michigan goes hard after student loan defaulters

Former college students in the eastern half of Michigan get hauled into federal court for defaulting on their student loans at 10 times the rate of the national average.

That doesn’t mean more Michigan residents are stiffing the federal government on their loans  – but it does mean they’re more likely to face legal consequences if they do.

A new report of federal data released by Syracuse University shows that there were 57 lawsuits filed to collect defaulted student loans in March, the second most in the nation -- and the highest rate per-capita.

Michigan's Eastern District covers 34 counties and has been at the top or near the top in federal student default civil lawsuits for the past five years.

About one in 10 student loans wind up in default in Michigan, about average for the country. But more of those defaults are taken to federal court because the U.S. Attorney’s Office in Detroit has been aggressive in pursuing judgments.

A Bridge analysis found that Michigan college students leave campus with higher debt than the national average, a reflection of higher average net costs at public universities.

The Eastern District contracts its collection efforts to four law firms. “This private counsel program started as a pilot program in five cities around the country back in the mid-1980s, with Detroit being the very first one,” recalled attorney Charles Holzman, whose law firm, Holzman Corkery, is one of four used by the U.S. Attorney’s Office.

"At first we weren’t filing many cases, but that was not effective,” Holzman said. Today, the firm “files the bulk in federal courts. File suit first and ask questions later is a lot more effective.”

Holzman said it’s not uncommon for Michigan’s Eastern District to collect more money from defaulted  student loans than any other district in the country, a record the lawyer says reflects collection strategy, rather than the amount of defaulted loans in the region.

The debt threshold for filing a lawsuit to collect defaulted student debt is $40,000, according to Mark Kantrowitz, publisher of FINAID, an online source of college financial aid information. Typically, lawsuits are only filed after other measures, such as wage garnishment, have failed.

“This is money that belongs to the taxpayers,” Holzman said. “For every dollar collected from defaulted student loans, it’s money that can be used again for student loans or taken off the deficit or used for other issues.”

Senior Writer Ron French joined Bridge in 2011 after having won more than 40 national and state journalism awards since he joined the Detroit News in 1995. French has a long track record of uncovering emerging issues and changing the public policy debate through his work. In 2006, he foretold the coming crisis in the auto industry in a special report detailing how worker health-care costs threatened to bankrupt General Motors.

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Phil Anderson
Tue, 05/15/2012 - 9:00am
Go court, go! Michigan's Eastern District is performing well - could even be ramped up. It's called PERSONAL RESPONSIBILITY, folks. A concept ignored or forgotten too often.
Tue, 05/15/2012 - 12:43pm
Yeah, personal responsibility like all other individuals and businesses that are allowed to declare bankruptcy when escalating costs and a poor economy appear. If you're going to prey on students with fewer opportunities to succeed than ever before in America, at least provide them the "dignity" to declare bankruptcy and get on with their stalled lives.
Tue, 05/15/2012 - 9:27am
How can you make someone pay their student loans when there are NO jobs. I agree - people have lost their sense of responsibility and as whole our society needs to get that back - even if by legal means. However, you can't squeeze blood from a rock! If these people are merely stiffing the government - then hey - good job. But, if they CAN'T PAY - what's the use of spending all that taxpayer money to take them to court?? Remember - the government has legal fees too! You end up with a lose-lose situation.
Tue, 05/15/2012 - 11:54pm
Are you so sure there are no jobs or is it that there are jobs it is just that the students didn't take the courses that would prepare them for the needs of the available jobs? How much more does it cost for a math or scieince or engineering degree than a political scieince or history degree?
Tue, 05/15/2012 - 9:38am
I get so sick of hearing how going after student loan defaulters is about "protecting the taxpayers." The people who default on student loans are taxpayers, too. Moreover, these are the people who went to college to get the better-paying jobs, and so were going to be paying more in taxes and contributing more to society than if they hadn't pursued higher education. But instead, let's all be like Phil and do the cranky grandpa routine: vilify people "trying to pull themselves up by their bootstraps" (a favorite phrase of cranky grandpas) by making ignorant assumptions about their lack of PERSONAL RESPONSIBILITY. Nope, the very government that is supposed to help them instead parades them into court and sues them, ignoring the fact that if someone's defaulted on their loans, they're probably not able to pay it back. We'll also ignore the fact that trying to get blood from a stone is also a waste of taxpayer resources, because at least they'll learn something about PERSONAL RESPONSIBILITY.
Tue, 05/15/2012 - 11:57pm
What makes you so sure that they are tax payers rather then kids simply borrowing money? What makes you so sure that they are learning the skills needed in the current market place and not just taking the course that they are most comfortable with to get a degree, any degree?
Susan Rowe
Tue, 05/15/2012 - 9:39am
It is very refreshing to be able to read actual articles that give us real news. It is sad that the days of good journalism is gone in most of the papers that are still publishing today. Now it is quick, facts not checked, and spelling/grammar is a thing of the past. Thank you.
Phil Anderson
Tue, 05/15/2012 - 11:58am
Such a shame that these so-called "bright" students are unable to do a bit of research to determine what degrees are losers, which might be winners. At a staff meeting one of these Bright" students remarked that ONLY after getting a BA in psychology did he learn that he couldn't perform counseling until he got an MA. And, Megan, where did you come up with the moronic idea that the government is "supposed to help them"? "Cranky grandpas" have something called intelligence and personal responsibility - things you seem to lack. Put on your big girl panties. Fact is, these people you bemoan are judged by you based on their INTENTIONS - not their actions. They are NOT paying more in taxes, not contributing more to society. Grow up!,,
Tue, 05/15/2012 - 12:56pm
"Cranky grandpa's" are the most subsidized group in this country claiming they deserve Medicare and SSI because they already covered the cost of these benefits. Hogwash! They suck resources from young families paying their senior socialism tab and then vote against school funding and health care for others while they watch cable for 30 years simply because they're old. On average, retirees over 65 use up what they've paid in much sooner than they claim: http://www.urban.org/retirement_policy/url.cfm?ID=901397
Wed, 05/16/2012 - 12:02am
Are you so sure that those who recieve SSI are not the ones that have been paying into it all that was asked for their working lives with the understanding it was a trust of their money and not a government program to be paid out of the general fund? If it was crreated a trust fund and the politicians have corrupted it by extending it to those who haven't paid into it, does that make the 'cranky old grandpa' to blame for accepting what they paid into it?
Tue, 05/15/2012 - 9:19pm
Phil, I'd really appreciate it if you left my panties out of the discussion. Clearly my lack of intelligence and personal responsibility made me forget to wear them when I posted, so let me extend my appreciation for your paternalistic condescension, which has served to put me in my place. May you crank on about things of which you know nothing for many years to come!
fred king
Tue, 05/15/2012 - 2:36pm
Who doesn't get this? If you signed up for a loan it should be paid back. Why would judicial systems not be deployed if escalated to that level? Use the money for school knowing you have to pay it back. Can't pay it back? Meet and discuss options. Won't meet to discuss options? Get your @$$ closer to the judicial system. Don't like how that's going? Pay it back. What? Still no? or did you just ignore the payback attempts all together? Ignoring isn't the way to go. That's where the issues are really at. Signed. Paid mine years ago.
Mon, 05/21/2012 - 10:28pm
The husband of the US attorney for Southeastern Michigan is employed as a part time lecturer at the Univesity of Michigan as is her chief deputy. They each make in excess of $200,000 for four months or less of part time work. Does that make them more motivated to go after students who owe the UM money? We need to keep tuition costs affordable in the first place. Read more at www.professorkauffmanforregent.com
Tue, 05/29/2012 - 10:36am
I am sick and tired of people complaining that they can’t repay on their student loans. I choose not to go away to school. I went to the local community college and then transferred to a local college to finish my bachelor degree. I saved thousand of dollars and walked away with a PAID IN FULL degree. These new up and coming students need to be told to start at the community college and discover which careers will best serve them once they enter the workforce.