Taxpayers Fund $454,000 Pay for Collector Chasing Student Loans

[xchrom]

http://www.bloomberg.com/news/2012-05-15/taxpayers-fund-454-000-pay-for-collector-chasing-student-loans.html

Joshua Mandelman made $454,000 in a single year as a student-loan debt collector -- more than twice the pay of the U.S. secretary of education.

His boss, Richard Boyle, chief executive officer of Educational Credit Management Corp., received $1.1 million in 2010, including commuting expenses from his ranch in New Mexico. Five other managers each took home more than $400,000.

ECMC, a Minnesota nonprofit group, owes its success to an 18-year-old agreement with the U.S. government. The company charges fees to borrowers and earns commissions from taxpayers -- totaling as much as 31 percent -- when it collects on defaulted student loans. Those rich rewards, which are approved by Congress, are sparking criticism that ECMC and similar collection agencies are reaping a bonanza from former students’ pain.

The loan program “is enriching collection agencies and undermining a goal we all want for society -- to encourage people to go to college,” Robert Shireman, a former deputy undersecretary of education under President Barack Obama, said in a telephone interview.

[aikoaiko]

1. Feeling like Ebeneezer...

It is unclear to me how getting people to pay on their defaulted loans undermines the education goal. Isn't defaulting on 100% of the loans worse than having a collections agent get at least 69% of the loans paid?

[grasswire]

2. I'd like to see this extrapolated.

What is the total cost of collections vs. the total amount owed (sans interest and penalties and fees).

It might be cheaper to just provide a subsidized college education to America's youth.