Recent Rise in Federal Suits to Recover Student Loans

The latest available data from the federal courts show that during March 2012 the government sued 279 individuals seeking recovery of defaulted student loans. According to the case-by-case information analyzed by the Transactional Records Access Clearinghouse (TRAC), this number is up 25.7% over the previous month when the number of civil filings of this type totaled 222.

The comparisons of the number of civil filings for recovery of defaulted student loans are based on case-by-case court records which were compiled and analyzed by TRAC (see Table 1). These numbers exclude filings against veterans.

Last September U.S. Secretary of Education Arne Duncan released figures showing that student default rates were rising and noted: "These hard economic times have made it even more difficult for student borrowers to replay their loans." However, despite the latest rise, current filings for recovery of student loans are down from a year ago when prosecutions generally were higher. When monthly 2012 civil filings of this type are compared with those of the same period in the previous year, the drop over the past twelve months has been just over 20 percent.

As shown below in Figure 1, prosecutions rose fairly steadily from 169 students being sued for defaulting on their loans in December 2009 to 598 students — or three and a half times — in April 2011, but then began falling. Even at their peak, relative to the hundreds of thousands of defaulters, prosecutions remain fairly rare according to the government.

Compared with the same period five years ago, suits for recovery of defaulted student loans for March 2012 remain higher. Overall, the data show that civil filings of this type are up 22.9% from levels reported in March 2007.

The month-by-month suits are shown by the vertical bars in Figure 1. The superimposed line on the bars plots the six-month moving average so that natural fluctuations are smoothed out. Reported one-year and five-year change comparisons are based upon the moving averages.

Top Ranked Judicial Districts

There is great variation among U.S. Attorney offices in how often the federal government goes to court to recover unpaid student loans. Even controlling for differences in population size among federal districts, some areas file relatively few prosecutions while others file many.

Table 2 shows figures for the top ten federal districts in the country on the per capita number of suits filed during March. The Eastern District of Michigan (Detroit) had the highest rate relative to its population: its rate of 8.7 per million persons was about ten times the level nationally. Michigan East has scored near the top of the rankings on student loan prosecutions for some time — a year ago this district was second in the nation, and five years ago it was first. (Rates are relative to population size since the actual numbers of defaulted student loans for each district were unknown.)

Half of all suits for recovery of student loans in March — 140 out of 279 — were filed in the Central District of California (Los Angeles). Relative to its population size, it ranked second in the nation behind Michigan East (Detroit). The Northern District of New York (Syracuse) came in third in terms of the number of its prosecutions relative to its population size, while New Jersey had the third largest number of suits filed (21) in the nation.

Table 3 lists in alphabetical order all districts in which at least one suit for recovery of a student loan was filed in March. Twenty-six out of the ninety federal judicial districts showed some activity. However, in thirteen or half of these there was only a single suit filed. Per capita figures in Tables 2 and 3 are per million population.

Judicial District	Percapita	Count
U.S. Total	0.9	279
Cal, C	7.6	140
Cal, N	0.1	1
Cal, S	0.6	2
Fla, M	0.1	1
Ga, N	0.2	1
Ill, N	0.7	7
Ken, W	0.9	2
La, E	0.6	1
Mich, E	8.7	57
Mo, E	0.7	2
N Car, W	0.3	1
New Hamp	0.8	1
N. J.	2.4	21
Nevada	0.4	1
N. Y., E	0.5	4
N. Y., N	3.8	13
N. Y., S	1.0	5
N. Y., W	1.4	4
Ohio, S	0.2	1
Okla, W	0.5	1
Oregon	0.3	1
Penn, E	0.2	1
Penn, W	0.3	1
Tenn, M	2.2	5
Wisc, W	1.3	3
W Virg, S	1.1	1

Table 3: All Districts Filing Suit for Recovery of Defaulted Student Loans in March