Signature needed: Reform student loan debt collection

CREDO action
Tell Education Secretary Arne Duncan: Reform student loan debt collection

Petition to Secretary of Education Arne Duncan
"The Department of Education should not be profiting from legally dubious, high pressure debt collection tactics. DOE must immediately take major reform steps, including ceasing to employ out-of-control private debt collectors, making public data about collector performance and pay, ensuring borrowers know their options and can easily communicate complaints, and ending the failed performance-based experiment in the Office of Federal Student Aid."

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Dear 5849376,


If a young person who took out a loan to go to school defaults on the loan, the government can garnish their wages and Social Security benefits -- resulting in poor credit which can follow them for years.

But if a private debt collection agency breaks the law, misleads young people about their options, and hounds the struggling with high-pressure scare tactics? According to recent reports and government investigations, the Department of Education (DOE) will reward them for successfully collecting more money.

Education Secretary Arne Duncan doesn't need approval from Congress to begin making changes. But with private debt collectors organizing to protect their profits, we will need to speak out to make it happen.

Tell Secretary Arne Duncan: Reform student loan debt collection. Click here to sign the petition.

Everyone from the DOE inspector general to the General Accountability Office to consumer rights groups and student organizations have found that the debt collection operation run out of the Office of Federal Student Aid (FSA) is broken. Debt collectors are rewarded for how much they collect, not how well they help hurting borrowers. And outrageously in some cases, they are paid based on their own estimates, not a government review of their performances.

Worst of all, there are documented examples of debt collectors violating federal law by misleading or failing to tell borrowers about their options.

Student debt has followed the same track as broader economic inequality. As the worst of the 1% has hoarded most of our economic gains, wages and family incomes have stagnated. Public university education has been slashed to pay for tax handouts for the richest few. Without cheap, quality public education to hold down prices, tuition at all colleges has skyrocketed -- in fact, college in the U.S. has gotten 12 times more expensive in one generation.1

The result is that today's young people have been forced to take on more debt than ever before, and then graduated into one of the worst job environments for new graduates in recent decades.

Helping people with student loans helps us all -- boosting the economy from the bottom up. But instead of putting borrowers first, we have a system that rewards the debt collectors who can be the most cruel and heartless -- and reward them it does, to the tune of $1 billion in tax dollars each year.

The Obama administration has taken reasonable steps to help with the overall student debt crisis, including providing loans directly, without bank middlemen taking a cut, and introducing new programs for those struggling to keep up. And recently, the Department of Education announced it had renegotiated contracts with its top debt collectors to incentivize them to help those with loans, and that it would incorporate feedback from borrowers into its assessments of the various companies.2

It's a good start -- and it wouldn't have happened without the sustained advocacy of consumer rights organizations, student groups, and Democratic senators like Iowa's Tom Harkin. But it's nowhere near enough.

Tell Secretary Arne Duncan: Reform student loan debt collection. Click here to sign the petition.

Recently, the National Consumer Law Center released a report that included ten recommendations for fixing debt collection,3 which include making it easier to get information or file a complaint online, publicly releasing data on debt collector pay and performance, and getting tough on companies that mislead borrowers. But the two biggest recommendations were reforming the Office of Federal Student Aid itself, and moving away from a system of private debt collectors altogether.

It turns out the FSA is part of a failed right-wing experiment with "performance-based organization." It is supposed to work on behalf of its customers, but debt collectors and students have different priorities -- and debt collectors have a lot more money. There's nothing "performance-based" about giving FSA leaders big bonuses for failing to put borrowers first.

And at the end of the day, no number of incentives will change the basic math for private debt collectors. They are in business to make money by chasing, harassing, and misleading people who have fallen on hard times. We stopped banks from taking a cut of student loans, but we're allowing equally devious companies to take a cut of student loan payments -- all the while making the lives of borrowers miserable.

Tell Secretary Arne Duncan: Reform student loan debt collection. Click below to sign the petition.

Thanks for helping us stick up for young people struggling to make ends meet.

Murshed Zaheed, Deputy Political Director
CREDO Action from Working Assets

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  1. "College Has Gotten 12 Times More Expensive in One Generation,", September 3, 2014.

  2. "Feds Overhaul Servicing Contracts," Inside Higher Ed, September 2, 2014.

  3. "Consumer Group Criticizes Education Department's Debt Collectors,", September 3, 2014.

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