From the Web: One State’s Approach to Collecting Student Loans

In Kentucky, several colleges and universities work with the state Department of Revenue for collection of unpaid student loans they say is necessary to recoup the funds while critics say it prevents due process for consumers.

8/10/2018 11:30 AM

From the Web: One State’s Approach to Collecting Student Loans

The Kentucky Department of Revenue is drawing some criticism that has morphed into lawsuits in reference to its approach to collecting unpaid student loans.

In an article for The Student Loan Report, Jamie Johnson reports that the Kentucky Department of Revenue has collected $50 million in student loan debts in the last 12 years by garnishing consumers’ wages and tax refunds, collecting millions of dollars in fees in the process.

Collection agencies are required to go through the courts and obtain an order to garnish wages, but entities like the Kentucky Department of Revenue are not mandated to take that route, according to Johnson.

In one case, a consumer sued the University of Kentucky HealthCare for garnishing her wages to collect unpaid medical bills. The case is in appeal, but Fayette Circuit Court Judge James Ishmael ruled the garnishment was “an abuse of power” by the university and ordered it to stop.

Five other colleges and universities work with the Kentucky Department of Revenue to collect unpaid debts through garnishment, Johnson reports.

While representatives of the schools, such as general counsel for Morehead State University Jane Fitzpatrick, say working with the department is their main mechanism to collect unpaid debts and they need tuition payments to keep revenue flowing after state funding cuts in recent years, critics say the garnishment practice sidesteps consumers’ rights to due process, according to the article.

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