4 Student Loan Debt Collection Tricks

What's Hot

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

Do This or Your iPhone Bill May SkyrocketSave

19 Moves That Will Help You Retire Early and in StyleFamily

11 Places in the World Where You Can Afford to Retire in StyleMore

What You Need to Know for 2017 Obamacare EnrollmentFamily

The 35 Two-Year Colleges That Produce the Highest EarnersCollege

5 DIY Ways to Make Your Car Smell GreatCars

8 Things Rich People Buy That Make Them Look DumbAround The House

50 Ways to Make a Fast $50 (or Lots More)Grow

32 of the Highest-Paid American SpeakersMake

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

5 Reasons a Roth IRA Should Be Part of Your Retirement PlanGrow

More Caffeine Means Less Dementia for WomenFamily

7 Household Hacks That Save You CashAround The House

30 Awesome Things to Do in RetirementCollege

Beware These 10 Retail Sales Tricks That Get You to Spend MoreMore

The anti-borrower behavior of some private companies used by the federal government to service and collect student loans has been exposed.

This post comes from Bob Sullivan at partner site Credit.com.

Debt collectors have been known to use dirty tricks to get consumers to pay, but those collecting student loans have an especially powerful tool on their side.

Unlike most other debt, student loan debt cannot be routinely discharged in bankruptcy. And depending on the type of loan, the debts can be collected through wage garnishments or even as deductions from Social Security checks. Student loan borrowers suffer from a decided lack of leverage when dealing with lenders and collectors.

This position of power emboldens student loan debt collectors. Perhaps that’s why, when the Consumer Financial Protection Bureau examined student loan servicing recently, it found a company that routinely called debtors at odd hours, violating federal law. In fact, one borrower received 48 such calls.

The massive student loan problem (there’s now more outstanding student loan debt than credit card debt) is an anchor that is severely hampering some young Americans from starting their adult lives. Roughly one-third of adults ages 18 to 31 live with their parents.

Of course, it’s not the amount of the debt that’s the problem, it’s the number of former students who can’t pay the debt. Earlier this year, the Government Accountability Office said that about $94 billion, more than 11 percent of the federal student loan volume in repayment, was in default.

“Hammering them … the rest of their lives”

Most of those in-default consumers will end up in the hands of a debt collector. In fact, the Department of Education contracts with private debt collectors in an attempt to recover the debts. The agency estimates that in 2014, taxpayers and student loan borrowers will pay more than $1 billion in commissions to student loan debt collectors, growing to more than $2 billion by 2016.

For years, advocacy groups like the National Consumer Law Center having been trying to get student debt collectors, particularly those working for the Department of Education, to clean up their act. Advocates say that many do a poor job of explaining options to borrowers who fall behind, for example. A report issued by NCLC in September was heavily critical.

“The government’s use of debt collection agencies is shortsighted in that promoting paths to success for struggling borrowers, especially those who are low income, is ultimately less costly for taxpayers than hammering them … the rest of their lives with draconian collection tools,” said NCLC attorney and co-author Persis Yu.

Now, there is some new federal attention on student loan debt collection. The CFPB supervises student loan servicing at large banks, and in December began supervising other kinds of student lenders, too.

Earlier this month, the agency issued a supervisory report that offered examples of anti-borrower behavior in student loan collections, impacting both consumers who were up-to-date and those who were in default. Here is what they found:

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,737 more deals!