Student Debt Collection – The Realities
- One in every 8 Americans have Student Loans.
- Federally Guaranteed Student Loan is approximately $1.4 Trillion Dollars. Double the amount in 2009.
- Of the 42 Million Americans with Federal Student Loans more than 7 Million are in default. Almost 3 million are more than one month behind in their payments.
The impact of this debt on the US economy, and on the social structure of our society looms large.
Despite Resounding calls for leniency in debt collection practices, it appears that the government is setting up 2 standards of debt collection practices. One standard for the debt collection industry, and a much easier second standard for student loan collections conducted by the government.
The Administration made the following pledge in 2004 about debt collection.
“make it clear that these companies are in the business of helping students, not just collecting payments, and they owe young people the customer service and support and financial flexibility that they deserve.”
But here is the reality.
On July 5, the Federal Communications Commission declared that government contractors, such as those employed by the Department of Education to collect on student loans, are exempt from a law that protects borrowers from phone harassment so long as they’re acting on government orders
Second, the Education Department selected its largest loan servicer, Pennsylvania Higher Education Assistance Agency, (alternatively known as American Education Services or FedLoan Servicing), as one of three finalists for a lucrative new contract to handle federal student loans. That same company is arguing in the US Supreme Court that it should have the immunity from lawsuits, just like the Federal Government.
Finally, the Education Department quietly enabled debt collectors that the government had previously accused of misleading distressed borrowers at “unacceptably high rates” to escape law enforcement consequences and land lucrative federal contracts.
It appears that the government is about strongly policing the traditional debt collection industry, while turning a blind eye to their own practices, while at the same time, preaching to the public about how Student Loan Debtors should be treated with far greater deference than other debtors.