National Consumer Law Center Paints Bleak Picture of Student Loan Collections

A report from the National Consumer Law Center paints student loan debt collection as fraught with abuse and error.

This isn’t tucked away in a footnote. It’s the title of the report: “Borrowers on Hold: Student Loan Collection Agency Complaint Systems Need Massive Improvement May 2012 Deanne Loonin and Jillian McLaughlin National Consumer.”

“By contracting out its defaulted loan portfolio and failing to provide effective oversight,” the report opens in its Executive Summary, “the Department has abdicated its responsibility to uphold the borrower protections in the Higher Education Act.”

NCLC has a list of Five Recommendations it would like to see implemented:

1. The U.S. Department of Education must create an accessible collection agency complaint system.

2. The Department of Education must change its commission system to incentivize quality service.

3. The accessibility of the complaint system should be considered in evaluating agencies.

4. Increase enforcement and oversight of the private collection agencies.

5. Private collection agencies must work to resolve complaints.

The Department of Education has not had a chance to fully review the 25-page report yet.

The Department of Education contracts with 23 private debt collection companies to collect overdue and unpaid student loans.

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