The U.S. Department of Education has canceled contracts with five debt collection agencies accused of exploiting people who have defaulted on their student loans. The move comes after years of complaints and investigations showing that profit-driven collection agencies withhold information about flexible debt relief programs that could help debtors. They inflate payments, then garnish paychecks and even withhold Social Security checks from those unable to pay. In some cases, they continue to hound people even after they have paid off their loans.
The Department of Education has cut ties with Pioneer Credit Recovery (a subsidiary of Navient Corp.), Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management.
“These student debt collection agencies are known predatory actors,” AFT President Randi Weingarten says. “Until higher education is free, collection of student debt should not be handled by for-profit firms. It should be brought back into the Department of Education, where it was for many years.” The AFT joined with coalitions and partners like the Higher Ed, Not Debt campaign and Jobs with Justice’s Debt-Free Future campaign to work for this change.
Student loans are big business: The Department of Education manages $744.3 billion in direct student loans, and it pays out more than $1 billion each year to collectors who track down borrowers who have defaulted. In some cases, for-profit collectors charge borrowers higher rates than the department requires.
Student advocates are encouraged that the five worst debt collecting offenders have been stopped. “This is a victory for every student who wants to climb the ladder of opportunity,” says Weingarten. “Let’s face it: Most of us aren’t pole vaulters; we climb this ladder one rung at a time. These student debt collection agencies are pulling the rungs out from under our nation’s students and graduates. We’re glad the Department of Education has finally taken a first step to protect those with student debt.”