Well, Student Loan Collections are worse –
than even I thought!
And my opinion of student loan collectors was,
is, they are abysmal.
Shahien Nasiripour has a great story at the Bloomberg site.
The Department of Education has even more ways to screw up.
The Education Department, which rewards its (student) loan servicers with more business if the loans they service remain in good standing, excludes rehabilitated loans when grading its servicers’ performance.
People who cannot afford to repay student loans, default.
When they are in default long enough, they are eligible to rehabilitate their student loans, by making 9 monthly payments. Which may be as low as $5 per month.
What I learned in the Bloomberg story:
For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation.
. . . . . . .
Close to 80 percent of borrowers who rehabilitate their debt make the minimum $5 monthly payment, according to a 2015 estimate by the National Council of Higher Education Resources, a lobbying group that represents student debt collectors and servicers. That means the Education Department is paying its debt collectors up to $1,710 per borrower to collect around $45, regardless of whether the borrower continues to make her payments.
Of course. They are in default to begin with, then get out for maybe $45 over ten months, well, they are still broke, so they default again.
But the DOE does not count those rehab loans when grading the servicers, who are paid billions by us.
The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.
Some lawyers aren’t helping either.
Just met with a client who had given $1,000 to another lawyer.
That lawyer promised lump sum settlements for repaying student loans that are not available.
He also discussed Social Security disability as a way to deal with student loan debt.
He was apparently unaware of the Total Permanent Disability (TPD) option for government student loans.
You can fill out the form online.
Now, this client was asking for his wife, who has not been able to work for 8 years, under the care of multiple physicians, one of whom should be able to sign the TPD form, which should be enough to get ALL her government student loans forgiven.
If you do need help with these kinds of student loan issues, contact me.