Private Debt Collection and Student Loans

Earlier this year, we discussed plans within the U.S. Department of Education (DOE) to hire private debt collection firms in order to track down delinquent student loan debtors. However, according to a recent article in U.S. News & World Report, the DOE “may sever ties with private debt collection firms.” What does this mean for student loan borrowers, and will it have any impact on debt collection practices?
Potentially Good News for Federal Student Loan Borrowers
The news that the DOE may cut ties with third-party debt collection companies could be good news for federal student loan borrowers who are currently in default. According to the article, consumer advocates have emphasized that debt collection tactics for past-due federal student loans have been problematic in many ways. In perhaps the least harm—albeit harmful nonetheless—debt collection methods, collectors have not given borrowers clear information about alternatives that could be available to help them repay their debts. More problematically, some of the third-party collectors hired by the DOE, including Performant Recovery and Windham Professionals, “have been accused of predatory practices,” according to the article.
While the DOE says the plan to end its relationship with private debt collectors is part of a larger scale process designed to modernize the student loan debt system in general, some consumer advocates have concerns about the Trump administration’s ultimate treatment of student loan borrowers, and particularly those who are having difficult making payments.
What has the DOE done recently for borrowers? The article points out that it has begun increasing outreach efforts to “at-risk borrowers,” meaning those who are 90 days behind on student loans. Previously, the DOE would not begin reaching out to borrowers until they were 270 days or more in default. In addition, the DOE has put forward a plan: Next Generation Financial Services Environment, or NextGen for short. It is designed to “provide a more uniform service for repayment” and to simplify the student loan repayment process.
Knowing Your Rights as a Consumer and Managing Student Loan Debt
Many people with student loan debt know that private student loan lenders, and debt collection methods connected to those loans, can sometimes engage in harmful debt collection practices. It is important to know that anyone who has taken out student loans—whether private or federal—has protections under the Fair Debt Collection Practices Act (FDCPA). Collectors who are working on behalf of the U.S. Department of Education must abide by the FDCPA just like any other debt collector.
In addition to protections under the FDCPA for fraudulent or deceptive debt collection practices, consumers should also know that it is not impossible to discharge student loans in bankruptcy. While it can be difficult to discharge student loans—and more difficult to discharge these loans than many other types of debt—numerous debtors are in fact able to show that continuing to make student loan payments would be a hardship, and they are able to have that debt discharged in Chapter 7 bankruptcy.
Speak with a Consumer Protection Lawyer in Oak Park About Your Student Loans
If you have concerns about deceptive student loan debt collection practices, or if you have questions about discharging student loans in bankruptcy, you should speak with an experienced Oak Park consumer protection lawyer. An advocate at the Emerson Law Firm can discuss your options with you today. Contact us for more information.
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