May 25, 2018

Following Push from Harris, Murray, Warren, Democratic Colleagues, Education Department Agrees to Phase Out Private Debt Collectors in Federal Student Loans

WASHINGTON, D.C. – The Department of Education filed a motion this week announcing a plan to phase out the use of private debt collectors contracted to pursue defaulted student loan borrowers, and instead rely on current loan servicers. Private debt collectors aggressively pursue defaulted student loan borrowers while profiting from taxpayer dollars. This announcement follows a January 23 letter sent to Secretary Betsy DeVos by U.S. Senators Kamala D. Harris (D-CA), Elizabeth Warren (D-MA), Patty Murray (D-WA), Kirsten Gillibrand (D-NY), Catherine Cortez Masto (D-NV), Ron Wyden (D-OR), Mazie Hirono (D-HI), Patrick Leahy (D-VT), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), Dick Durbin (D-IL), and Dianne Feinstein (D-CA) asking them to reconsider the use of private debt collectors. 

In the letter, the Senators highlighted the responsibility the government has to provide access to an affordable education, and the threat posed by the Department of Education’s practice of outsourcing the task of dealing with defaulted student loan borrowers through contracting with private debt collection companies. They expressed substantial concerns about the effectiveness of these companies and their cost to taxpayers.

Additionally, Senators Harris, Murray, and Warren joined Representatives Suzanne Bonamici (D-OR), Bobby Scott (D-VA) and Susan A. Davis (D-CA) in calling on the Inspector General of the Department of Education to examine whether the use of private debt collection agencies to collect defaulted student loans is a waste or misuse of taxpayer dollar in a February 5 letter.

“Every student has the right to an affordable education to enable them to reach their full potential,” said Senator Harris. “I am pleased the Department of Education has decided to phase out the use of private collection agencies who have questionable efficiency and are a clear burden to taxpayers. I will continue to follow up and hold the Department accountable to this commitment. We should work to direct resources toward keeping student borrowers out of default, not chasing them down.”     

“Higher education is supposed to open new doors and opportunities, but far too many students are forced to take out a mountain of debt just to earn a degree and are being chased down by private debt companies when they struggle to make ends meet,” said Senator Murray, ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee. “I’m pleased Secretary DeVos listened to Congress, and the millions of students and borrowers who were desperately asking for her help, and I will continue to hold her accountable to ensure the Department takes the necessary steps to ease the burden of debt for struggling student loan borrowers.”

“The Education Department’s contracts with private student loan debt collectors are a nightmare for student borrowers and a waste of hundreds of millions in taxpayer dollars,” said Senator Warren. “Many of these companies have a disturbing history of lying to student borrowers and breaking the law. It's time for this gravy train to start coming to an end.”