If we were a little smarter about how we kill people and sell drugs, we could afford to forgive the debt in collections for every American.
Late night comedian John Oliver got a lot of attention for purchasing and forgiving nearly $15 million in medical debt, which he claimed is more impressive than Oprah giving out tons of free cars. (We’ll take the cars.) He seems to have gotten the idea from Strike Debt, an offshoot of Occupy Wall Street, that has canceled medical and private student loan debt worth nearly $32 million since 2012.
They can do it for pennies on the dollar because debt sellers figure they’re never going to be able to collect most of the money anyway. They make a small profit by taking what they can get, which got us wondering: How much would it cost to buy up all the American consumer debt in collections and forgive it? Here’s what we found out, and some ideas to get it done…
Why this is a horrible idea
This is a fun exercise and hopefully an educational one, but not much more. Even if all these ballpark figures panned out, we’d really only see a short-term benefit to American credit scores. Most people’s lives probably wouldn’t improve much at all, for a few reasons.
First, there’s so much debt in collections because people can’t afford to pay what they owe, and so they’re probably never going to. It’s just going to ding credit scores until it rolls off, so this wouldn’t be adding any money into people’s pockets or teaching them any financial responsibility.
You might argue it would make people happier and stimulate the economy, but there are other problems that would negate that. The second big one: This is just current debt in collections, a tiny fraction of the total debt we have that’s current or delinquent. We owe $733 billion on our credit cards, $8.25 trillion on our mortgages, and more than another trillion each on auto and student loans. Inevitably, some of that debt will be in collections soon.
Lastly, the fact that we could come up with a kind of magic solution to wipe it all away could trigger a mass default — people refusing to pay what they owe because everybody else is and they’re getting away with it. And you wouldn’t be able to pull this trick more than once in a lifetime, anyway: Once debt collectors see it happen, there’s no way they’re selling you $15 million in debt for a mere $60,000.
Brian Bienkowski contributed research to this report.
Article last modified on August 17, 2016. Published by Debt.com, LLC .