Bloomberg – The National Consumer Law Center reports that the Department of Education relies heavily on collection rates rather than complaints againt collectors when award contracts to recoup money from student loans in default. Complaints against high-pressure, and in some cases unethical, collection tactics filed with the DoE have risen 41% in one year as the department increases its use of private collectors. The department paid out $1 billion in collection fees last year in its efforts to collect a back-owed $67 billion. The report states that collectors are much more interested in collecting the money than helping debtors work out a reasonable payment plan. Department regulations allow agency contractors to focus on recovering the entire debt rather than receiving what current and former students can reasonably pay. The Department is considering reversing this approach so that repayments are based on what students can afford. It has not yet reviewed the findings of the NCLC’s report. For more, read Student-Loan Debt Collection Criticized in Report.

 

Students should maximize grant money before turning to student loans. A good finacnial aid plan will help you avoid student loans. For more information on how you can make the financial aid system work for you, attend one of our free financial aid webinars!