You just made that up and then complained about journalists that did actual reporting on the issue, and I don't even think you read the actual article.

That's an absolutely insane way to do statistics. You can't just say "it's a deterrent" and then magically assume that anyone who pays their debts wouldn't have in absence of the evidently horribly inefficient debt collecting process.

It's a pretty safe bet that if no one was collecting this debt, not many people would pay it back.

Even if they didn't have collectors at all it'd trash your credit. Without even getting into the issue of whether there is a more efficient way of collecting.

99% of college graduates would be in a financially better state if they could forget all their student loans in exchange for a credit hit.

Credit is nice, but it is not NEARLY as nice as not having debt.

That's true, but I would bet money that if you were able to take the pulse of Americans collectively you'd find people putting way more weight on their credit scores than is strictly rational. I've lost count of the number of times I've seen it suggested that people do irrational things like carry revolving credit card balance or take out loans they don't really need to "build credit."

Most debt collectors aren't going to do much more than ruin your credit and call you a lot anyway.

Actually, allowing students to discharge their debt would solve this problem as lenders would start means testing students to see if they are credit worthy.

Unless you're looking at their parents pretty much no student is "credit worthy" for a loan into the tens of thousands of dollars in the traditional sense.

Or add together the effects of all deterrents, like trashing your credit or just plain guilt.

If you think people will pay nevertheless government should declare the payment voluntary and see how many people pay.

That's not at all what he's saying. To judge the efficacy of a deterrent, you need to be able to identify the expected payment rate in the absence of said deterrent. The problem with that is that identifying the difference is incredibly difficult. If not damned near impossible.

That said, I'd question the deterrent effect. Per the article, nearly 40 percent of 'recovered' borrowers default within the next three years. Combined with paying debt collectors "nearly 40 times what they bring in," it seems as if there's a measurable problem with the current approach. But is that a problem with current recovery efforts, or merely a symptom of a larger issue? Like with most things student loan-related, there are no easy answers here.

A few DB entries scan trash somones credit rating which is a deterrent and extremely cheap. Further many people feel an obligation to pay down debt even when they can walk away without consequence.

Right. Like, say, capital punishment.

Horrifically inefficient. But hopefully effective for a larger audience.

That is why non-recourse private debt sells for 40 times par /s

If deterrence is the main value here, surely they can still improve the process a bit?

you're right about the total cost of collection. it should be measured on actual collections not just defaults.

but in this case it sounds like a substantial amount of that expense goes towards getting people back onto plans. so thats obviously a default-specific expense.

I have to disagree with your assessment about wether the government should be in the student loan business. Providing employment for the sake of community/national services is the exact role of government.

Right, we have a term for "when you won't pay more to enforce than the cost of the violation":

The term is "non-enforcment".