By
Ashley Russell on January 16, 2012
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A significant amount of students are using student loans these days. The United States government is very helpful about providing subsidized loans with little to no interest rate that help people afford the cost of tertiary school, also known as college. With a bad economy it is often hard for recent graduates to get jobs to pay back these loans. More pressure on individuals pushes some to default on student debt. Student loan debt collection can be very different than other debts in several ways, mainly because it is through the government.
When individuals default on their debts for a prolonged period of time, they often find themselves hassled by collection calls pressuring them to repay debts, fees, and interest charges. These are often third party collection agencies that purchased their debt at a lower price than it’s worth from creditors and will do anything to get the debts repaid as quickly as possible. As this practiced evolved, there were increasing instances of collection agencies utilizing abusive methods to get their money, such as calling at all hours of the night, calling friends and families about the debt problems, making up lies, etc. The
Fair Debt Collection Practices Act (FDCPA) created a set of guidelines for collection agencies to follow when attempting to collect outstanding debts, limiting these abusive tactics.
One way that student loan debt collection is very different than other debt collection is in the regulations of the FDCPA. According to this law, government employees whose job it is to collect debts are not obligated to follow the rules set by the FDCPA. This means employees of the government collecting debts such as for the Internal Revenue Service (IRS) or Federal student loans, are not required to follow the FDCPA. Thereby limiting the rights of the individual in debt, though most government agencies follow their own guidelines similar to the FDCPA. However, if the government official or office outsources the debt collection to a third party outside of the government, the debt is then collected under the rules of the FDCPA.
Student loan debt collection has also been made easier with the creation of the U.S. Department of Education's (Department) Default Resolution Group. The Department Default Resolution Group is the overhead of all types of debt repayment and grant repayment issues. When debts from the Family Education Loans, Direct Loans, and
Perkins Loans are not repaid as expected they are sent over to this group to be collected. This is also the case of grants that have been over-awarded or when the individual is no longer eligible for grants, such as the Pell Grant, TEACH Grants, SMART Grants, and many others. This simplifies the repayment and collection process, and makes the government more efficient when dealing with student loan debt collection.
With so many students turning to loans to help them afford their college education, it is important for them to know about the student loan debt collection that will happen if they cannot repay their loans. By knowing about the student debt collection process, students can prepare themselves accordingly and hopefully avoid this process altogether.