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Student Debt Collectors May Face New Restrictions
Obama administation proposes new policy for collecting public student debt
Private companies who are paid to collect student debt for the Department of Education may face new restrictions on how, and how much, they can collect from student borrowers.
A "Bail Out Schools, Not Banks" protest as President Barack Obama spoke about college affordability at Colorado University in Denver on October 26, 2011. Photographer: Jewel Samad/AFP/Getty Images The Obama administrations is proposing a new policy that would force collectors to offer borrowers a standard form to fill out where repayment options are based on income, as opposed to the size of the loan debt. Under the proposal, payments could be as low as $50 a month for someone making $20,000 a year.
Student loans recently surpassed credit card debt as the leading cause of consumer debt in the United States. The new proposal is only applicable to public loans.
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Bloomberg: Obama Plans Overhaul of Student-Loan Debt Collector Practices
The Obama administration proposed requiring that debt collectors let student-loan borrowers make payments based on what they can afford, rather than on the size of their debt.
The U.S. Education Department, which hires private collectors, said yesterday it would mandate that the companies use a standard form to gather debtors’ income and expenses. If borrowers protest, they would be offered an income-based formula, which can result in payments as low as $50 a month for an unmarried person with $20,000 in income and $20,000 in loans.
The collection companies -- which receive commissions of as much as 20 percent of recoveries -- are facing complaints that they insist on stiff payments from defaulted borrowers even though the Obama administration and Congress have approved more- lenient plans, Bloomberg News reported March 26. The education department is also reviewing the commissions it pays collectors.
“We definitely feel a sense of urgency to make sure we are doing everything we can to serve the interests of taxpayers and students,” Justin Hamilton, an Education Department spokesman, said in a telephone interview.
The agency first proposed changing the rule governing the treatment of defaulted borrowers a year ago, Hamilton said. After a public comment period, the regulation may take effect as soon as July 2013.
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30 Comments so far
Show All"If it sounds too good to be true, it probably is."
Folks, this is the US of A. The almighty dollar rules. Creditors win long before debtors can come up for air.
To sum up American Politics. There are two pro-business parties in the US that consists of millionaires and suckers.
C O L L E C T O R S
for cryin' out loud ...
Update: OK, you corrected the headlines but check the copy.
"The Obama administrations is proposing a new policy that would force collecters ..."
I'd like to see two issues being addressed but don't expect it from the political duopoly and the constituents that support the duopoly.
1) Force or coerce states to go back to restore funding to public education institutions. This has been one driver of increased costs to students. This can be done in many ways including withholding federal aid to schools/states that don't comply including passing legislation that would cut athletic programs if schools wouldn't comply.
2) In conjunction with #1, provide at least a partial student debt amnesty for the students that got shafted during this recent period of transferring unmanageable costs to the student. Education benefits society and previous generations understood that as the cost was shared by all. Now all of a sudden, generations that benefited from subsidized education are leaving their kids out to fend for themselves.
Obama's tinkering with interest rates and payment plans may help the pain but doesn't address the real problem.
"Obama's tinkering with interest rates and payment plans may help the pain but doesn't address the real problem"
True. But until he can get a Congress stocked full of right-wing assholes to get on board with a better alternative, neither he nor Mother Theresa would be able to address "the real problem." It's Congress that makes the laws, duh.
My observation as well. There is also a lot of pressure from students and their parents to be given higher grades, earned or not, because they are paying lots of dollars in tuition and therefore "deserve" high grades. Yielding to that pressure is the path of least resistance for most professors.
With respect to Ivy League schools only accepting 6% of applicants: um, perhaps something to do with those schools receiving way more applicants than they have available slots in their classrooms. (Yeah, a wacky idea, I know.) Enlarging those classes from 20 to 200 wouldn't exactly enhance the educational experience.
U.S. News and other magazine "rankings" of the best schools doesn't help. This creates an obsessive interest among the privileged in getting their children into those hallowed Ivy halls, when in most cases a good public university education will suffice for a bright and self-motivated student. But of course that doesn't ensure their kids will rub elbows with the Geithners and Romneys and Obamas and Bushes and other elites who will be future rulers of this country. However if you're interested in working for authentic change taking place down in the trenches, consider getting a less expensive education.
But thank dog for small favors.
In return, the student ought to give back, year for year, service in some government agency or program at minimum pay (like in the peace corps as originally organized) while their food, shelter, and clothing allowances are provided. The energy, creativity, and effort that could be unleashed by such a program could truly transform the inner cities, rural and small town wastelands, and crumbling infrastructure of this troubled "for profit" land.