To: Arne Duncan, U.S. Secretary of Education
U.S. Secretary of Education: HELP STUDENTS! Stop Spending a Billion Dollars on Student Loan Colle...
The Department of Education is paying $1 billion dollars a year to collection agencies to collect on defaulted student loans when the reality is that almost no one should default if adequate default prevention and aversion counseling strategies were put into effect and adequately funded.
Unemployment remains stubbornly high with a national rate of 8.2% and among young adults (16- to 24-year-olds) it’s over 18%; delinquencies and default rates are rising as indebted student loan borrowers struggle to repay hefty student loans that averages $25,000 upon graduation. With $67 billion of student loans in default, the Department of Education has turned to private debt-collection companies to pursue borrowers.
Debt collectors in general received almost 181,000 complaints last year, which has led to intervention from the FTC, which is cracking down on agencies that aren’t obeying the rules. It has been reported that they are violating federal laws by insisting on stiff payments, even when student loan borrowers’ incomes make them eligible for leniency. According to Harvard Law Professor Elizabeth Warren, “Student-loan debt collectors have power that would make a mobster envious.”
Three companies that work for the Department of Education settled federal and state allegations of abusive collections, according to Bloomberg.
Unfortunately, college debt isn't just taking a financial toll on millions of borrowers. It's also inflicting staggering costs on the health, careers, emotional well-being and personal relationships of those burdened with big college loans.
What Happens If You Default on Your Student Loans
The following are consequences of what can happen when you Default on a Federal Student Loan:
1. Administrative garnishment of wages
2. Seize federal and state income tax refund
3. Ineligibility for additional financial aid
4. Heavy penalties & high collection charges
5. Derogatory credit rating to all major credit bureaus
6. Loss of Credit
7. Withholding of professional certifications
8. Loss of professional business license
9. Refer loans to Dept of Justice for Litigation
10. Ineligible for FHA and VA loans
11. Courts rarely discharge student loans through bankruptcy
Surging above $1 trillion, student loan debt in the United States has surpassed credit card and auto-loan debt. This debt explosion jeopardizes economic recovery and possibly sets the stage for a new economic crisis.
We urge you to sign our petition and share it with everyone you know to protect student loan borrowers from collection agencies and provide students with highly experienced counselors to guide them through the loan repayment process and restore their dignity.
Sources: Bloomberg, Department of Education, Bureau of Labor and Statistics
Why is this important?
By: Student Loan Counselors at R&B Solutions
With $67 billion of student loans in default, the Department of Education has turned to private debt-collection companies to pursue borrowers. The Department of Education spent a billion dollars last year to collection agencies that collect on defaulted student loans. The reality is that almost no one should default if adequate default prevention and aversion strategies were put into effect. Delinquencies and default rates are rising as indebted student loan borrowers struggle to repay hefty student loans.
Americans are still recovering from the mortgage crisis, which resulted in millions of Americans losing their jobs and homes. Now a new crisis is affecting students as they have large loan debt, and they cannot find jobs or earn a high enough income to repay the debt causing them to default on their loans. There is a solution though; most students would never enter the collection process to begin with if the Department of Education focused on assisting students with repayment options already available.
We urge you to sign our petition and share it with everyone you know to protect student loan borrowers from collection agencies by providing students with the assistance necessary to guide them through the loan repayment process.
Sources: Bloomberg, Department of Education, LA Times and NY Times.