education consumers often receive
makes the student loan market tricky to
navigate. Most student loan collectors
today act as counselors of sorts, helping
to guide current and former students
through the process of getting their loan
paid off and improving their credit.
“We spend a substantial amount
of time and resources in education,”
Glezerman said. “Even third-party
collectors, if they’re not already
doing this, they are being pushed in
the direction of including financial
education—understanding the
consequences of default and what options
For many young people, a student
loan is their first venture into any type
of credit. Often when undergraduate
students are in school, their parents
are helping to pay their bills, so after
graduation students may not have much
experience with paying back loans or
even the sense of when a payment is due.
To complicate the matter, many
consumers don’t take the time to read
or understand their loan terms and
options for repayment—or even respond
to letters or answer the phone when
a collection professional attempts to
contact them.
“Frankly, if student borrowers just
called their lender or servicer, many
would avoid default,” Taylor said. “Even
when accounts are placed with us, it is a
struggle to communicate as borrowers
typically do not proactively respond.
Our work today is more customer
service in helping borrowers rehabilitate
or consolidate, compared to the old ways
The Future of the Industry—Market
Bubble?
College tuition and fees have
outpaced inflation over the last several
years, while wages have stayed the
same or fallen, according to 2014
analysis from the Pew Research Center.
Additionally, the New York Federal
Reserve has noted that student loans
have the highest delinquency rate of any
form of household credit. Some industry
participants say that current trends in
the ballooning student loan market will
eventually lead to a correction, which
could have far-reaching affects.
“I think that at some point the
question will become, ‘How much is the
federal government willing to absorb
losses?’” Glezerman said. “Because 90
percent of student loans out there are
federally backed loans. I think that’s
really sensitive in the political arena
right now.”
He noted that the bubble bursting
could mean forgiving $150 billion in
loans. “What would that do from a
public policy perspective?” Glezerman
asked. “Even with the new repayment
options—the Pay as You Earn—at the
end of 20 years, the remainder of a
loan’s unpaid balance would be forgiven,
and the administration has yet to fully
quantify what the cost could be to the
nation. I’ve heard estimates of $55
billion over 10 years, but I think that’s
low.”
Issues in the current market have
limited the number of new collection
agency entrants. Out of the four student
debt markets available—the DOE
contract, guarantee agencies, university
loans and receivables, and private
student loans—“if you’re not already a
player, the chances of breaking into the
market are difficult at best,” Taylor said.
For agencies already in, success in the
student loan market hinges on the same
skill sets as those in any other collection
market: Treat people right. Focus on
serving the consumer and following
the clients’ guidelines. Make sure your
agency is complying with all state and
federal rules and regulations.
“As this market continues to grow,
it will continue to get a lot of attention
from regulators,” Neeb said. “Borrowers
are having a lot of trouble with the
loans, and regulators are very sensitive
to borrowers being mistreated in any
way. I believe in the market—it’s still
growing—but it’s riddled with issues
right now.” cm
Anne Rosso is editor of Collector.
Tips for Collecting
Student Loan Debt
1 Don’t discount the consumer’s reason for refusing to pay the debt.
What you might initially perceive
as a stall may be a valid objection.
2 Consumers who refuse to pay their debt because their school has closed
may be eligible for a complete
discharge of their federal student
loans. Collection agencies should
have processes in place to address
this possibility.
3 If consumers cite the “poor education” they received from their
school as a reason for not paying
their debt, that does not necessarily
eliminate their responsibility
for fulfilling the terms of their
signed promissory notes. Carefully
document those conversations
and review account information
before considering whether to send
the account back to the client for
review.
4 Many consumers find their student loans confusing. Collectors should
be prepared to talk them through
the terms of their loan as well as
their repayment options.
5 Be familiar with not just collection laws and regulations, but also the
student loan regulations and related
requirements governing these types
of debt.
