A contractor for the Education Department is accusing the agency of leaving billions of dollars of uncollected student loans on the table by refusing to follow through on a solicitation.
iStock By Danielle Douglas-Gabriel Danielle Douglas-Gabriel Reporter covering the economics of education Email Bio Follow February 28 A contractor for the Education Department is suing the federal agency, alleging that billions of dollars in defaulted student loans go uncollected because the government is not lining up new private debt collectors.
The company claims that despite a court ruling barring the Education Department from canceling the collection contract, the agency is circumventing the decision with three new solicitations for student loan servicers. Those requests for proposals seek to procure, among other things, default collection services.
Student loan default rates are far outpacing the rate of collection, and it could get worse as the Education Department plans to eliminate seven of the collection agencies in April, according to the complaint. Colleen Campbell, director for postsecondary education at the Center for American Progress, argues private collection agencies prioritize recovering money over providing struggling borrowers with sustainable solutions for managing their loans. Everyone could actually win once the Education Department moves forward with plans to revamp the collection system, Campbell said.
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