Feds Cut Off Student Loan Collectors

The U.S. Department of Education on Friday announced plans to end contracts with five private collection agencies after finding they made "materially inaccurate representations" to struggling borrowers.

The agency intends to wind down its debt-collection agreements with Navient-owned Pioneer Credit Recovery, as well as Coast Professional, Enterprise Recovery Systems, National Recoveries and West Asset Management. Additionally, the department said it would step up its monitoring and guidance of such collection agencies, which work under government contracts, to ensure that they give borrowers accurate data on their loans.

Friday's announcement comes after a review of the contracted private collection agencies found that the five companies misled borrowers about the loan rehabilitation program, which enables borrowers to get out of default by making a series of on-time payments. The agencies provided deceptive information about the effect on borrowers' credit reports and the waiver of some collection fees, the department said.

The department also said Friday that it would provide enhanced monitoring of all of the companies that collect federal student loan debt, Inside Higher Ed reported.

"Federal Student Aid borrowers are entitled to accurate information as they make critical choices to manage their debt," Under Secretary of Education Ted Mitchell said in a statement. "Every company that works for the department must keep consumers' best interests at the heart of their business practices by giving borrowers clear and accurate guidance."

 

Related Links

U.S. Education Department Press Release

http://www.ed.gov/news/press-releases/us-department-education-end-contracts-several-private-collection-agencies

Inside Higher Ed

https://www.insidehighered.com/news/2015/03/02/us-ends-contract-5-debt-collectors-citing-misrepresentations-borrowers