Student Loan Collections: The Big Issue Wrap-Up

Over the past month, insideARM.com and content sponsor F.H. Cann & Associates have taken an indepth look at student loans — not just collections, but the impact this asset class has on the workforce and the economy.

Student loans are a big issue for the ARM industry because, as an asset class, they represent the largest consumer credit market outside of mortgages. And as education costs rise in the U.S., the market will do nothing but grow.

So as we close the pages on this Big Issue, we thought it would be illustrative to look at the Top 5 Pieces of Student Loan Content we published:

1) Who’s to Blame for Federal Student Loan Defaults?
This piece by our own Michael Klozotsky generated a lot of conversation. In it, he looked at some of the shifting complications of debt for those who aren’t in default on their student loans, but are also still deeply affected by the level of debt they’re carrying. Not everyone agreed with some of Kloz’s conclusions:

“Without the taxpayers assistance in obtaining the education that places those in higher income levels, and enabled those consumers that willingly borrowed under a clear set of terms, the income to buy the Porsches and $1,000,000+ homes, it wouldn’t have happened and they’d be driving a Chevy and living in an average house. This kind of nonstop nonsense in reaching for more freebies on the back of the middleclass taxpayer is proof positive of the need for tax reform and hopefully a flat tax system.” — Don Daly

Some offered their own interesting take:

“The ROOT of this serious epidemic is deep and complex.

Of course there is significant responsibility bestowed on the borrower, in most cases kids ranging from 17-22 years old. They’re older once the loans become due, but at the time of commitment most of these borrowers are pimple faced teens that lack education about credit to make wise decisions before they sign on that dotted line. Many end up with horrible private loans whose interest rates are akin to charging their education on credit cards.

To make matters worse, most of these “kids” do not know how to budget the money they’re borrowing, and end up overspending on things that have nothing to do with getting an education. If you were ever in college you know the things I’m referencing. Hand a 17 year old kid a $5,000 check, and faced with tuition and books costing less than $2k, I know where the rest of that money tends to go.” — Brian

Some looked at the issue from a wider lens — going back to our primary school education:

“I see this becoming a lot bigger than what it is now. I don’t understand why our public education doesn’t teach our future minds how to balance a check book, make and maintain a budget, review loan documents, and learn basic knowledge of finances. We give them knowledge of math, English, science, wood shop, metal working, auto shop, and the arts, but none of those will prepare them for what is coming. I don’t see any changes on this or any other problems with finances until our young minds are taught.” — Drew Martin

The entire conversation generated by this post is well worth diving into, and one of the reasons we were so excited to launch this specific Big Issue.

2) Evolution of Student Loan Collections
We received this piece of content from Don Taylor, Sr. Vice President of Sales for Array Services Group, Inc.. He looked at student loan collections from the trenches — both Before 1993, and After 1993. “The Omnibus Budget Reconciliation Act of 1993, which included language that was previously introduced as the Student Loan Reform Act, significantly amended the Higher Education Act of 1965 (HEA). This legislative change affected the recovery of defaulted student loans by introducing loan consolidation and Administrative Wage Garnishment (AWG). The law also retroactively eliminated the statute of limitations for federally-guaranteed student debt. Borrowers with loans originated as far back as the 1960’s were contacted to repay or face AWG.”

3) Is it Socially Acceptable to Not Pay Your Student Loans?
This was a question asked by contributor Tom Gillespie, President of Access Receivables, Inc. His answer — which he explores more than answers — wasn’t necessarily to the liking of one commentor:

“One of the most rhetorically driven pieces on the subject I’ve ever seen. Its only logic is twisted back on itself. It doesn’t express at all the larger problem. The writer was evidently a man who’s had few real worries in his life.” — Alric the Red

4) Report Distorts Student Loan Debt Collection: ACA International
Patrick Lunsford looked at ACA International’s response to a critical report released by the National Consumer Law Center (NCLC) on the student loan debt collection contract between the U.S. Department of Education and private collection agencies.

NCLC thinks that the Department of Education should “simply stop using collection agencies” in a delightfully nonchalant use of the word “simply.”

ACA thought that NCLC was off the mark: “In recovering delinquent or defaulted student loan debt on behalf of the Department of Education, collectors are proud of their exceptional customer service and efforts to return tax dollars to American taxpayers.”

Several commentors agreed:

“The source of the article, NCLC is using the standard argument that there are no good collection agencies out there. On the contrary this group has shown, especially in the recent months, “Nice Guy” collectors recover more money. Companies that are concerned about respecting the consumer and following the letter of the law and companies that follow through on those concerns are the majority. We have to shout about those companies and address articles that focus on the “Bad Guy” collectors.” — Ronna Denny

“My thoughts exactly. Just change it from “base collection agency compensation on complaints received” to “base collection agency compensation on VALID complaints received.” And also give them a bonus if it is shown that there were invalid complaints received.” — Sisko

5) To Collect from Students, You Need to Connect with Students
Tom Gillespie also brought us this piece. “The current approach is not working,” he tells us.”The collection process is adversarial from start to finish. ‘If you don’t do this, we will do that.’ That business model doesn’t work anymore.”

Again, we wanted to extend our deepest thanks to F.H. Cann & Associates for their generous sponsorship of the Student Loan Big Issue. The collaboration between us and F.H. Cann allowed us to present this incredible series of in-depth articles and opinion pieces — content you won’t find anywhere else.

Stay tuned for our next Big Issue: Complaints.