Collection agencies working in all
lines of business will be watching to see
how the industry is affected by the DOE
“I think any time something
significant like this happens, we as an
industry need to pay very close attention
to why and how it happened,” Williams
said. “We want to understand why that
business was pulled, and figure out what
we can do to proactively protect our
companies as well as our employees’
In spite of this drama, the DOE
private collection agency contract
remains “the single largest opportunity”
of the student loan collections market
due to its sheer size and increasing
volume of accounts, according to Taylor.
Bloomberg Business reported that the
government paid $898 million to private
agencies that collected defaulted student
loans in 2013, a 92 percent increase
from the previous year.
But the DOE contracts are difficult
to get, and it could be at least 10 years
before the next opportunity comes up,
unless agencies get on as subcontractors
for one of the current companies. Even
those opportunities are limited, as many
subcontractors have been working with
the current unrestricted companies.
“The train has left the station,” Taylor
said. “The opportunities in this market
going forward will be considerably less if
you are not already participating.”
The Fall of a For-Profit College
When the Consumer Financial
Protection Bureau sued the troubled
Corinthian Colleges in September 2014,
it accused the for-profit school of luring
tens of thousands of students to take out
private loans to cover expensive tuition
costs by advertising false job prospects.
In February 2015, Educational Credit
Management Corp. purchased more than
50 campuses from Corinthian Colleges,
and transitioned them from for-profit
to nonprofit status. The acquisition was
made through Zenith Education Group,
a newly created nonprofit provider of
career school training and a member of
ECMC. Zenith eliminated institutional
loans and provided an estimated $480
million to help Corinthian students’
private student loan debt.
While the move reduced eligible
students’ private student loan amounts by
40 percent, that still left many with large
outstanding federal loans to grapple with.
Several state attorney’s general have since
urged the government to forgive the
students’ federal loans.
In early March, 15 former Corinthian
students announced they were going
on a “debt strike,” refusing to pay
back their federal student loans. The
declaration attracted a flurry of attention
in the media—as well as among other
dissatisfied Corinthian students. By the
end of March, the “Corinthian 15” had
become the “Corinthian 100.”
David Glezerman, assistant vice
president and bursar of Temple
University, estimated that the
Corinthian 100 movement has likely
affected as many as 20-30 companies
out of the more than 200 ACA members
working in student loans. He noted
that when dealing with students who
intentionally refuse to pay their debts,
collection agencies need to uncover
consumers’ reasons to determine how
to proceed because there are potential
benefits available to federal loan
borrowers whose schools have closed.
According to the DOE, students may
be eligible for a complete discharge of
their federal student loans if:
•;The entire school closes while
students are enrolled, and they are
unable to complete their program.
•;The school closes within 120 days
after the students withdraw.
Unfortunately, many former
Corinthian students not covered by this
provision. While not all of them are on a
debt strike, many are unhappy or bitter.
Neeb said his previous company
served a few for-profit colleges, and
some of those former students were
angry about their educational experience
as well. They felt they had been taken
advantage of by their college.
“There was a lot of push-back with
those consumers against their for-profit
college, which trickled down to us at
the collection agency level,” Neeb said.
“Students would complain that they had
a dispute because the education they
received didn’t help them get the jobs
Neeb trained collectors to be
sensitive to those consumers, and at the
end of the call collectors were required
to close the account and send it back to
the client for review.
At its heart, the Corinthian protest
highlights two major hot-button issues:
for-profit schools that sometimes
engage in predatory lending practices
and the skyrocketing cost of education.
Agencies collecting student loan debt
should keep a close eye on how the
situation unfolds as well as how they
Collection agencies working in all lines
of business will be watching to see
how the industry is affected by the
Doe contract cancellations.