The announcement about federal student loan contracts with debt collection agencies comes months before payments on hold since last year are set to resume. ACA International spoke with The Wall Street Journal about its implications for members and borrowers. Editor’s note: This article is for members only.
11/5/2021 17:30
The U.S. Department of Education is cancelling its contracts with student loan servicers assigned to collect federal student loans, according to a report from The Wall Street Journal. (A subscription may be required to view this article.)
DOE Federal Student Aid Chief Operating Officer Richard Cordray said “that collecting on defaulted loans would now be handled by five private contractors hired by the department last year to provide customer support to borrowers as they navigate the repayment process,” according to the report.
The contract cancellations will impact ACA International members. Before Cordray’s announcement, the DOE had recently extended the federal student loan servicing contracts through December 2023, ACA previously reported.
“This decision, made for the sole purpose of scoring political points, will cause hundreds of Americans to lose their jobs,” said Leah Dempsey, ACA International’s vice president and senior counsel, federal advocacy, in The Wall Street Journal article. “It will also elongate and complicate the process for former students to address legal obligations, harming both consumers and the taxpayers left on the hook.”
ACA continues to push back on flawed policymaking decisions that unfairly target the accounts receivable management industry, and will continue to educate Congress why consumers and the economy are harmed when professional debt collectors are removed from the process.
Related content from ACA International:
Big Waves Coming When Student Loan Payments Resume