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Student complaints lost to deaf ears: Private collection agencies need centralized complaint system for students

By mary clark

May 18, 2012 12:51 a.m.

Finding a job and paying back student loans are not the only challenges recent graduates face.

The private agencies that collect debt and are contracted by the U.S. Department of Education are often more concerned with profit margins than providing fair, quality service.

Further complicating the issue is the process for filing complaints through private agencies regarding customer service, which is neither centralized nor easily accessible.

The Department of Education should see that students, who are already shouldering a massive debt burden, are able to easily express concerns about collection agencies through the creation of a centralized complaint system.

The National Consumer Law Center recently released a paper calling for improvements to the U.S. Department of Education’s complaint system, citing statistics indicating the number of complaints from borrowers has risen significantly in recent years.

The complaints, which the paper says are not properly handled or channeled, cover issues regarding mistreatment of borrowers by private collection agencies, which the federal government contracts to collect student loan payments.

The complaints usually involve harassment, excessive phone calls and inflexibility on the part of the collection agencies, who do not always offer reasonable payment plans to recent graduates.

Jillian McLaughlin, a research assistant for the National Consumer Law Center and co-author of the paper, said complaints can be made to both the Better Business Bureau, the private agency handling debts, and the Department of Education, making data collection regarding complaints extremely difficult.

This lack of organization also means many of the complaints are never even seen by the agencies themselves and often never reach the Department of Education, from which agencies receive their commissions. Thus, agencies are only held accountable to the government, not the students whose concerns should be heard.

The number of complaints, though difficult to track, appears to be increasing, McLaughlin said. Complaints need to be heard by both the agencies and the Department of Education.

But, even further, the department should consolidate the collection process ““ which currently includes 17 different private agencies ““ and possibly even eliminate the practice of contracting altogether.

McLaughlin said agencies are rewarded based on the percentage of debt they collect.

Essentially these agencies are working for the government, not the student borrowers, and are therefore less concerned with quality service than their bottom line, for which they are rewarded by the U.S. Department of Education.

The paper from the National Consumer Law Center suggests that the department should not work with third-party contractors at all. That would be the best, albeit least realistic, solution to the problem.

Although that solution could take considerable time to enact, eliminating the third-party contractors would simplify the entire collection process, including the complaint system.

On a local level, average UCLA student debt after graduation is considerably lower than the national average, and the default rate is also lower, said Ronald Johnson, director of financial aid at UCLA.

At UCLA, 44 percent of students take out loans to pay for college. Following graduation, the average UCLA student debt is more than $18,000, Johnson said, adding that the national average for student debt is between $23,000 and $25,000.

These shockingly high numbers reflect deep-seated issues with education funding across the board, for which there is no quick fix. But at least students should be able to pay back that debt in a fair amount of time without being hassled by loan collectors.

Even though the university’s default rate is considerably lower than the national average, Johnson said plenty of students still struggle to pay off their loans, and the financial aid office has heard their stories.

Johnson said the financial aid office does not deal directly with debt collection complaints, but said he knows students often struggle with aggressive debt collectors who do not offer the best service or payment options they could.

For recent graduates shouldering unreasonable amounts of debt, the least the private collection agencies could do is provide quality service and reasonable payment plans.

If they do not do so, the least the Department of Education could do is listen to students’ complaints and hold the agencies they contract accountable.

Email Clark at [email protected]. Send general comments to [email protected] or tweet us @DBOpinion.

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