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
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