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Education Dept. Cuts Ties with Debt Collection Contractors

Michael Rapp April 14, 2015

According to the Huffington Post, the U.S. Education Department has severed ties with several of its debt collection contractors for wrongdoing and years of complaints from student borrowers. Among those who will no longer be working for the Education Department is Pioneer Credit Recovery, who is owned by Navient Corp., formerly known as Sallie Mae. Pioneer had served the Department since 1997.

The Education Department has received a plethora of complains for student loan borrowers for some time now. Common complaints include issuing student loans with unacceptably high interest rates, and countless violations of fair debt collection laws. The Education Department also relieved Coast Professional, Enterprise Recovery Systems, National Recoveries, and West Asset Management of their debt collection duties.

The severance of its debt collection contractors is part of a larger effort by the Education Department to improve the overall student loan industry. Per theHuffington Post, approximately 7 million student borrowers have defaulted on their loans, and federal student loan debt now surpasses $1 trillion.

Other reasons for the Education Department firing its debt collection contractors include the frequency of complaints regarding inaccuracies on student loan debt. The CFPB is among many federal and state agencies working to improve the process and accuracy of student loan debt collection.

The Education Department is in the process of transferring accounts previously managed by terminated contractors to its trusted contractors who have played by the rules. The transition is expected to take quite some time to complete, as the recently-fired contractors managed accounts for a majority of federal student loan borrowers.