It’s no secret that student debt is at an all-time high. According to the US Department of Education, there are more than 40 million student loan borrowers who owe more than $1.2 trillion. That is an incredible amount - for reference, a stack of $1000 bills would be more than 67 miles high if it were to equal a trillion dollars…that’s where the bills are stacked on top of each other, not placed end-to-end! In any case, the huge amount of student debt is important information for consumers, debt collectors, and even the Consumer Financial Protection Bureau (CFPB) to know. Let’s take a look at why…
A college education is practically the new high school equivalent - it’s pretty much expected to get a job. Combine this with rising tuition rates, and people have a lot of pressure - financial and otherwise - to find a way to pay for school. Unfortunately, this means student loans (unless you have access to scholarships, independent wealth, grants, or other resources). If you’re one of the many trying to pay off student debt, check out this recent blog...it explains options like forbearance, consolidation, delinquency, and deferment. There are also some links to resources and advice to help you figure out the best way forward.
It’s also important for debt collectors to be knowledgeable about student debt. In a 2012 report on “Private Student Loans” given to four Congressional Committees, it specifies that borrowers are protected by many different federal acts, like the “Truth-in-Lending Act (TILA), the Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the Federal Trade Commission Act (FTCA), and the Consumer Financial Protection Act (CFPA).” Debt collectors will recognize most of these acronyms as regulations that govern collection behavior, and student debt is no exception. Compliance is an incredibly important part of the collections process - so much so that we’ve devoted an entire page to various laws and regulations. For those trying to partner with a collections agency to collect on student loans, make sure that the agency is familiar with the FDCPA and CFPA especially.
As for the CFPB (the Bureau, not the Act), they have taken a renewed interest in the subject of student debt. In May of this year, the Bureau announced that it is launching a public inquiry into student loan servicing. This is in order to investigate “industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service.” Results of the inquiry will likely result in recommendations for changes to the entire student loan process - which can impact consumers and collection agencies alike. We’ll be sure to pass along any pertinent information that comes out of this inquiry.
As shown above, the debt incurred through student loans is astronomical, and it’s a phenomenon that impacts millions of Americans. It’s important for consumers to know what options they have to pay back loans, and it’s equally important for debt collectors to stay abreast of the regulations and laws that govern debt collection as it relates to school loans. To learn more about different types of debt collection, please take a look at our blog.