News & Resources

Education Department exercises new debt collection technique

Jun 19, 2014 Philip Burgess

Education Department exercises new debt collection technique

Millions of college graduates have taken out either federal or private loans to help them pay costs related to attending secondary institutions. As a result, the nation's consumer credit has risen considerably over the past decade.

A number of students have begun defaulting on monthly dues, putting them in a poor financial position. Federal authorities that provided former university enrollees with the funding necessary to receive a secondary education are taking new measures to hold borrowers responsible.

Exercising garnishments

According to The Wall Street Journal, after a former college student fails to pay his or her monthly bill 12 times in a row, the U.S. Education Department is permitted to automatically withdraw as much as 15 percent of that person's after-tax wages. The source noted that many people remain in garnishment for up to 10 years, depending on how much money they owe the government.

The source acknowledged's findings, which asserted that the Education Department is experiencing higher garnishment rates. At the end of March, outstanding federal student loan debt rose 9.2 percent from last year, totaling $1.1 trillion. About 10 percent of people borrowing from the federal government who entered repayment in fiscal 2011 defaulted by the end of commercial 2012.

Private loans dramatically lower
In contrast, The Wall Street Journal acknowledged that private student loan debt stood at $170 billion, a considerable amount less than the Education Department's rate.

One of the reasons why this statistic persists is likely due to the federal government's lax approval rates. Private creditors employ more stringent standards when looking for potential borrowers in an effort to ensure that they'll be able to pay back loans without sustaining considerable financial setbacks.

Debt collection agency expands
Buffalo News reported that Continental Service Group, a secondary education debt collection firm based out of Fairport, New York, recently signed a lease for 25,000 square feet in the AppleTree Business Park in Cheektowaga, New York. ConServe Chief Financial Officer Richard Klein noted that the move correlates with the organization's plan to double its personnel over the next several years.

ConServe was ranked as the No. 1 small collection agency on the Department of Education's contract for student loan procurement from 2004 to 2012. Its mission is to approach those who have accumulated debt to pay for secondary education in a fair, unaggressive manner. In addition to working for the federal government, ConServe provides debt collection services to private businesses.