Since 2012, the U.S. Department of Justice has collected $87 million from those who took out student loans and then defaulted.

Most of that money — $63 million, or 72 percent of the total — was recovered after federal authorities hired private debt-collection law firms nationwide, according to data Justice Department officials provided to WHYY.

The new numbers follow a WHYY investigation that found federal authorities are increasingly taking borrowers to court in the Philadelphia area after hiring a law firm (KML Law Group) that specializes in foreclosures to aggressively pursue those with unpaid student-loan debt. It is a controversial partnership that the feds are deploying in more than a dozen districts around the country that has drawn criticism from advocates for the debtors.  

Rohit Chopra, senior fellow at the Consumer Federation of America, said $87 million may sound like a whopping sum, but it is less than 1 percent of the $137 billion in student loans that remain unpaid or are at least nine months past due. 

"The tidal wave of defaults is creating a big opportunity for those to profit off that pain. And the debt collection industry certainty looks at the student-loan market as a big growth opportunity," said Chopra.

 

The government has the administrative power to collect federal student-loan debt without ever going to court. Every year, thousands of borrowers have their wages garnished, their tax refunds remitted and other government benefits diverted to unpaid student-loan debts.

But federal figures show that these administrative methods account for just about a third of what the government recovers every year from borrowers. Since 2012, diverting borrowers' tax returns and other methods resulted in a $24.8 million payment on defaulted student loan debt.

The remaining amount was collected from borrowers after the U.S. hired private debt-collection law firms, who over the past five years, filed suits to win judgments or payments to the federal government. It is the result of thousands of lawsuits against mostly low-income people who have fallen behind on student-loan payments.

"It probably costs more for the government to use these attorneys, rather than work with borrowers to get them in a payment plan that they can afford," said Chopra, a former Department of Education official and student loan expert. 

In the past year, at least 131 borrowers in the Philadelphia area have been taken to federal district court by the firm KML Law Group on behalf of the federal government, court records show. 

North Philadelphia resident Emmitt Piedra, 65, is the latest to find himself a defendant in one of these cases.

In 1989, according to the suit, Piedra took out a loan for $2,625 from the Department of Education. Since then, the interest has more than the doubled what he owes — to $7,020.21.

The suit says that $250 has been credited to the loan, money the government recovered after diverting his federal tax refunds.

If Piedra does not respond to the suit, a judge will enter a default judgment against his home, and it is within the government's power then to force a sale on his house to recover the debt that is owed to the Department of Education.

Piedra never returned a call seeking comment. 

In response to critics of the strategy of hiring private lawyers to target decades-old student loan debt, federal officials have said that debt collection has always been one of its priorities, saying that hiring private counsel advances that goal within the letter of the law.