Stop Abusive Student Loan Debt Collectors

Target: U.S. Department of Education

Goal: Stop harmful student loan debt collection practices by requiring that debt collectors offer payment plans based on income and changing debt collectors commission structure

Student loan defaults are on the rise and the U.S. Department of Education has turned to private debt collection companies to recoup the loans. Some of these debt collectors have been accused of coercing borrowers into making minimum payments on their loan without disclosing that they may be eligible for lower repayment options. Federal law requires that debt collectors offer defaulted borrowers reasonable payment options and forbids them from making any misleading or false statements.

Through contracts with the U.S. Department of Education debt collectors are incentivized to collect as much money as possible from borrowers. Debt collectors receive a 16% commission if they rehabilitate a loan. Loan rehabilitation entails the borrower making nine loan payments in ten months that are a minimum of 0.75 to 1.25 percent of the total loan amount. If the borrower does not make the minimum payments the debt collector only receives $150 in payment for their services. Therefore debt collectors may push borrowers into making minimum payments to receive a higher commission even if lower repayment options exist for the borrower. Last year alone debt collectors received $1 billion in commissions from the U.S. Department of Education. Therefore it is of little surprise that the number of complaints the Department of Education received regarding abusive debt collectors rose 41% last year.

The Department of Education is considering a new rule to combat abusive debt collection practices. The rule would require debt collectors to automatically offer loan repayment options based on income to borrowers that quality. The rule is a step in protecting borrowers from unscrupulous debt collectors but more should be done. The Department of Education should also change the payment structure in contracts with debt collectors. As long as debt collectors are encouraged to collect as much money as possible from borrowers they have no incentive to offer lower repayment options that would help the borrower afford loan payments and get out of default.

By signing the petition below you will help urge the U.S. Department of Education to adopt rules and change its payment practices of debt collectors to stop their abusive practices towards student loan borrowers.

PETITION LETTER:

Dear U.S. Department of Education,

Student loan defaults are on the rise as are the number of complaints filed by borrowers regarding abusive debt collectors. There are approximately $67 billion of student loans in default currently and the number of complaints regarding abusive debt collectors increased 41% last year. Some debt collectors have been accused of coercing borrowers into making higher payments than they are required to and not offering them lower repayment options in violation of federal law.

Under contracts with the Department of Education debt collectors are incentivized to collect as much money as possible from borrowers. Debt collectors receive a commission of as much as 16% of the loan amount if they are able to rehabilitate a loan and only $150 if they are unable to. Loan rehabilitation occurs when a borrower makes nine loan payments in ten months of between 0.75 and 1.25% of the loan amount. However that amount may be higher than the loan payment they would be required to make based on their income. This leads debt collectors to not offer borrowers lower repayment options so that they can reap a higher commission from the Department of Education leading to abuses of borrowers.

To remedy this problem the Department of Education is considering a rule that would require debt collectors to offer payments based on income to borrowers that qualify. In addition to the rule the Department of Education should also consider a change to how it pays debt collectors. If debt collectors were not incentivized to collect as much money as possible for borrowers and instead encouraged to help borrowers find a repayment option that works for them it is likely that the number of abuses would drop dramatically.

I urge you to consider changing how the Department of Education pays debt collectors in addition to adopting a rule that would require debt collectors to offer loan payments based on income to stop abusive debt collector practices.

Sincerely,

[Your Name Here]

Sign the Petition

  • Only your name will be displayed. By signing, you accept our terms and may receive updates on this and related causes.
FacebookCare2 NewsTwitterEmailShare

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Facebook Comments

comments

42 Signatures

  • Lea Faulks
  • Nikki Owen
  • Ana Maria Mainhardt Carpes
  • Doris Telles
  • Darlene Roepke
  • Eveline Mutsaerts
  • Lynn Juozilaitis
  • Ann Blank
  • tam O
  • Mary-Carol Gales
1 of 4123...4
Skip to toolbar