For Cecily McMillan, getting mail while incarcerated was a complex project. Any letter that was sent to her went through a metal detector and was opened by correctional officers before landing in the mailroom, where she had a two-hour window to collect it on a good day, she said.
McMillan was living in the Rikers Island facility, a city-run jail complex in Queens, N.Y., but that did not stop the clock on her student loan payments. McMillan was serving a 58-day stint for assaulting a police officer, who tried to remove her from Zuccotti Park on the night of March 17, 2012, when people had assembled to mark the Occupy Wall Street protests. Eight months after she was released, McMillan realized she had missed a letter from a government debt collector warning that one of her federal student loans was coming due. She ended up defaulting on her loan, leading that debt to balloon 35 percent to more than $7,600. In all, she had more than $100,000 in student debt.
Her experience helps to illustrate the persistence of student loans—the only form of consumer debt that can almost never be erased, even if you declare bankruptcy. While collectors for other types of loans also pursue debtors behind bars, federal student loans are different because the government is the collector, which means taxpayer money is spent trying to reach borrowers who cannot easily communicate with the outside world and have few opportunities to earn money to repay the debt. McMillan, for example, said she was making less than a dollar per hour at her job as a suicide-prevention aid worker at Rikers. The average federal prison worker makes about 92 cents per hour, according to the Economic Policy Institute.
“There is really no value to trying to collect debt from those who are incarcerated. The Department of Education is misusing taxpayer dollars in an attempt to collect money from those who have no realistic chance of being able to pay,” said Chris Hicks, a consultant to unions on student loan issues. The Department of Education declined to comment on the record for this story.
The Education Department has no policy in place to automatically halt loan collection during the time someone is incarcerated, but borrowers can notify debt collectors or the government that they will be behind bars and request a forbearance or deferment, which postpones payments. The department can cancel the debt entirely if a borrower is to be incarcerated for more than 10 years, and defaults, meaning they stop making payments for more than 270 days. From fiscal years 2012 to 2014, government debt collectors stopped collecting payments for 82,021 people in jail or prison. The Education Department does not keep track of the number of student loan borrowers who are incarcerated.
Hicks, who has investigated the collection of debt from incarcerated people, estimates that in recent years up to 200,000 people with student debt have been in jail or prison, but have not identified themselves to the government. To formally request a delay on repayment, imprisoned borrowers need to write a letter on the penal institution's letterhead, including the name, title, and phone number of a prison official who can verify the information. Many people may not even know what paperwork to file in order to get a break on payments, said Hicks.
Collecting on student debt is not cheap, even when the borrowers are not in a correctional facility. It takes debt collectors seven months to recoup what they spend on a 30-minute call to someone who is more than 270 days late on student loan payments, according to an estimate from researchers at Elon University and the University of Michigan. McMillan said the Education Department shouldn't pursue imprisoned people, who have few opportunities to earn enough to pay back college loans and have enough trouble making their way into the job market once they have served time.
“Already these people can’t find houses and cant get jobs, and then you are going to also put them in a situation where their credit is ruined, as if felon status wasn’t enough?”