Collector - August 2018 - 31
94% Of student loans are paid off with at least one large payment ahead of schedule. The median final payment is 55 times larger than the scheduled payment. Source: Bureau of Consumer Financial Protection trend among colleges and universities has the schools getting students to acknowledge their debts through the use of online or paper financial responsibility agreements, which include consent for third-party contacts that comply with Telephone Consumer Protection Act requirements and acknowledge collection fees/costs that consumers will be required to pay. DEALING WITH DEFAULTERS Unlike the private student loan programs, whose requirements for collection are likely based on protocols similar to other types of unsecured loans, the federal loan programs have prescribed sets of due diligence requirements for billing and collection that must be followed by the original creditor and, subsequently, thirdparty agencies. For example, agencies cannot maintain an account referred to them by the creditor for more than 12 months unless the borrower is making regular payments on the debt. In other cases, borrowers who have not yet graduated from school and want to receive additional federal loans or Pell Grants to pay for their remaining educational expenses must bring their loans back to a non-delinquent status, though not necessarily paid in full. Borrowers may qualify for a deferment or forbearance based on their inability to pay or other related circumstances, which could reduce or eliminate their default status, by submitting necessary forms and/or evidence of their situation. As a result, "re-educating" the defaulted student loan borrower is often the first step a debt collector must take once reaching the right party. Sometimes borrowers who have not yet completed their educations believe that payment does not become due until COLLECTOR 08.18 they have graduated, even if many months or years have passed (grace periods following graduation or non-attendance normally are six to nine months). In other cases, consumers may not understand that they can qualify for temporary deferment or forbearance benefits to delay their repayment if underor unemployed. Educational debt collection efforts typically contain a counseling component to help motivate the consumer. Often, helping consumers understand how resolving their debt can ultimately lead to future benefits from improving one's credit score to being able to obtain credit at more favorable rates could lead to an enhanced lifestyle and no longer needing to live and budget like a student. Helping student loan borrowers find the right solution to resolve their delinquent debt and even restore their credit standing may be as simple as identifying where and how they can find the resources to pay off their balance. When resources aren't immediately available to the borrower, exploring a refinancing through consolidation of all outstanding student loans that will provide additional time and/or enhanced or more favorable repayment options can lead to a mutually satisfactory account resolution and debt repayment. By using positive motivation and counseling techniques, debt collectors can help consumers find the best solution to pay off their current debt and create a brighter future. David R. Glezerman is assistant vice president and bursar at Temple University in Philadelphia. He can be reached at david. glezerman@temple.edu. KEYNOTES 1 Many student loan borrowers have a limited understanding of their loan obligation, including who lent them the money or where they should send payments, and collectors often need to provide some financial counseling. 2 Unlike most federal student loans, private loans require borrowers to prove some level of creditworthiness or an approved co-signer, but these obligations often have less favorable terms and conditions for repayment. 3 Agencies aren't allowed to maintain a student loan account referred to them by a creditor for more than 12 months unless the borrower is making regular payments on the debt. 31