Collection agencies are a big part of the student loan collection system. Both the government and guaranty agencies often hire private collection agencies to collect defaulted student loans. The Department’s contracts with private collection agencies are available on-line. The Department also posts information listing default recovery rates by collection agency. These agencies charge very high fees that can add a lot of money to student loan balances. Private lenders frequently hire collection agencies as well.
These agencies may engage in abusive or deceptive behavior that violates state or federal fair debt collection laws. A key component of our policy priority agenda is to get rid of private collection agency involvement in collecting federal student loans. This policy brief highlights the importance of stopping collectors from gouging student borrowers. Until this happens, you should be aware of common problems and learn about ways to fight back. At a minimum, you should consider filing a complaint with the Department of Education and other agencies if you are facing harassment or other problems with student loan collectors. Other agencies that can help include the Consumer Financial Protection Bureau (CFPB). The CFPB has an on-line complaint system. You should also learn about your rights, including the right to be free from collection agency harassment and abuse and to send a letter to request that an agency stop contacting you. You can use these self-help packets in English and Spanish to help you write this “cease communication” letter. The CFPB also has sample letters you can use to respond to a student loan debt collector.