Got Millenials? Democrats Should Address the Student Loan Crisis Immediately

[adirondacker]

49. While I agree with your tactic, WHO is to blame for the involvement of Private Debt Collectors to

become involved?


"Consumer Law Center’s Student Loan Borrower Assistance Project, finds that the U.S. Department of Education heavily favors high pressure student loan collection and debt collector profits to the detriment of millions of financially distressed borrowers seeking help.

Key Findings

The Collection Agency Contractor System Costs Taxpayers Billions and Sets Up Conflicts
The Department of Education estimates that in 2014, taxpayers and student loan borrowers will pay over $1 billion in commissions to private student loan debt collectors, growing to over $2 billion by 2016. Low-income borrowers are especially harmed because the government often seizes benefits, such as the Earned Income Tax Credit, that are aimed at promoting economic mobility. Additionally, the Department hires debt collectors not only to collect on student loan debt, but also to communicate with borrowers about options to help borrowers address and resolve the debt, creating a conflict of interest.

Government Incentives Drive Collection Agency Behavior
Changes made to the compensation system in July 2012 demonstrate that the options collection agencies offer to borrowers are driven by the fees the government pays, not by the law. Loan “rehabilitation” is an important way for a student loan borrower to get out of default. Before July 2012, the government paid a much higher fee to a collection agency that arranged for a loan rehabilitation that required payments that did not take the borrower’s income into account than for one that did. Even though borrowers have long been entitled to more affordable rehabilitation payments based on the borrower’s financial circumstances the government’s collection agencies almost never arranged them until the government equalized the fee structure in July 2012"