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Soaring student debt a boon for debt collectors

Nov 05, 2011 Mike Garretson

The U.S. Department of Education (ED) recently discussed its current portfolio situation and the restructuring of a new contract with debt collection vendors, insideARM reports. ED's current vendor contract is set to expire at the end of 2012. And while the department refused on comment on the number of collection agencies that would be on the new contract, it was clear that because of its constantly growing portfolio collection, firms would be clamoring to get involved. The department's default portfolio is set at more than $33 billion, containing around 3 million borrowers and 15 million active loans. It added that it hopes to improve the current recovery rate, which sits at 11.5 percent. ED aims to reach just under 14 percent in 2012 and slightly above 14 percent by 2015. Furthermore, the commission pool is estimated to reach $500 million in 2012 and $700 million by 2015. Despite this lucrative opportunity, some debt collectors are wary to jump right in, said Mark Russell, M&A transactions manager for Maryland-based debt collection consultancy Kaulkin Ginsberg, as quoted by Inside Student Debt. "Certain clients, particularly the colleges and universities that ... outsource [debt collection] have had pretty strict guidelines on how their debtors should be treated," he said.