How Universities And Colleges Need To Get A Better Handle On Their Outstanding Student Loans

The number of universities and colleges in financial difficulties are on the rise.  Until now, the focus has been on student loan debts and how many students have no choice but to default on their obligations.  Promised or hoped-for jobs have vanished at astonishing speed, forcing graduates to work in positions that pay minimum wages or maybe a little above the minimum.  Most of those graduates have no benefits.  They have no health or dental insurance, no hospitalization, no life insurance and no 401K for their retirement.  However, they purchased their education from universities or colleges and those institutions rely on student loan payments to perpetuate good education.  Their object is not to engage collection lawyers to drain the students’ finances, but to hire them to stay solvent.

Universities Struggle Through Default

The other side of student debt is the struggling college that needs to be paid by the government for the services already rendered.  Colleges are often chosen for their specialties, like engineering or nursing or whatever advances a student best in their interests.  This means to be constantly up-to-date with equipment, the newest computer technology, modern laboratories, libraries that hold not only books but also media equipment and computers.  Dormitories are also constantly in need of repair.  A fiscal budget must meet many expenses and, hopefully, have some reserves.  When students are in default, the government will not allot that money to the universities or colleges. 

A Last Effort

Some higher learning institutions have reached for harsher tactics to ensure that future generations of students can engage in a good college education.  Some outright sue the student in a court of law.  Other universities or colleges use debt collection agencies to recover some of the money owed to them.  Collection agencies are busier than ever as the economy has hit a long-term low point.  

Much of Student Loan Debt is Not Being Paid Back, According to a Recent Report

The percentage of unpaid debts in the U.S. isn’t nearly as dismal as it was a few years ago—or even last year—except for one type of debt: student loans.  While the percentages of total consumer debt fell this year, as well as delinquency rates for that debt, student loan debt has been steadily growing for the past 8 years, with delinquency rates on the rise, as well.  In whatever way you look at it, the outlook isn’t a positive one.

From a report released in September, outstanding student loan debt now totals $956 billion and is still rising.  Approximately half of that amount is new student loan debt that is being taken on, while the other half is defaulted loans that are now showing up on credit reports across the country, affecting the credit of thousands of Americans.  It is now calculated that some 11% of student loans are now 90 days delinquent, which is considered “serious delinquency” by most credit standards.  In addition, many student loans are in deferment based on the debtor’s circumstances or continued enrollment in school, so these rates could be even higher once deferment periods end.  Since deferment is a limited prospect, it remains to be seen what will happen when it ends for the hundreds of thousands who have taken out more in student loan debt than they can afford to pay back. 

Since student loan debt is one of the few types of debt that cannot be discharged in bankruptcy, it remains to be seen what effect student loans will have on the economy if the default rate continues to rise.  Meanwhile, collections agencies and collections attorneys are watching closely to see just what role they will be playing in the process and whether student loan debt will be the next big debt bubble to hit our nation.  

Familiarity with Student Loan Debt Collections is Crucial for Debt Collection Agencies

As student loan debt continues to rise, the number of agreements that debt collection agencies receive increase as well.  While this is great business for debt collection agencies, it is crucial that agencies be well aware of the rights that consumers (students in this particular case) have.

·         Debt collection agencies can only call a certain number of times per day.

·         Debt collection agencies can only call between certain hours of the day.  Contacting outside of these hours is deceptive and illegal practice on their behalf.

·         Debt collection agencies may not use any form of abusive or threatening language nor can they threaten debtors with the pursuit of legal action.

·         Debt collection agencies can, for no reason, contact a debtor’s co-workers, employers, relatives, friends or neighbors regarding the debt owed.

·         Debt collection agencies are prohibited to take part in deceptive debt collection methods, as outlined in the FDCPA, Fair Debt Collections Practices Act.

·         Debt collection agencies cannot misrepresent the amount of debt owed or the status of the debt.

·         Debt collection agencies are not allowed to provide any information regarding the owed debt to third parties.

·         Debt collection agencies are not permitted to continue contacting a debtor if that debtor has provided, in writing, a request to no longer be contacted.

·         Debt collection agencies must halt all contact with the debtor if an attorney is representing him or her.

·         Debt collection agencies must provide debtors with information regarding the debtor’s entitlement to validating the said debt.  If within 30 days the debtor has requested validation, all communications must cease until the debt has been thoroughly and appropriately validated.

Student borrowers have rights when it comes to student loan debt collection and these rights must be considered by debt collection agencies; otherwise, trouble looms as the borrower is entitled to requesting compensation for damages.