The US Department of Education is recommending that a single entity handles all student loan debt collection.
Monopolizing debt collection may help avoid confusing student loan debt collection laws.
Having a single debt collection agency also means lower operating costs.
This can also prevent massive budget overruns in the future Daily Tarheel reports.
Student Loan Debt Collection Monopolization | What NOW?
The Department of Education published a proposal stating they will select one servicing company to collect all student debts on May 19.
Monopolizing student loan debt collection is the Department of Education’s proposed solution to simplify the debt collection process in the US.
There is over $1 trillion worth of student loan debts in the US that’s currently being handled by nine different debt collecting contractors.
Creating or acquiring a single institution tasked to collect student loans may be more cost and time efficient for the government.
Women Hold Two-Thirds of the Country’s Outstanding Student Loan Debt https://t.co/jJYFN9iZv5
— Mae (@mklee936) June 16, 2017
Simplifying Student Loan Debt Collection in the US
The Department of Education sees several flaws in the existing student debt collection process:
- Shifting deadlines depending on the collecting agency
- Contradicting debt collection regulations
- Complicated payment management system and monitoring
A single institution may make it easier for borrowers. The government agency also sees repayment plans to be easier to manage with just one collecting agency rather than with the current nine collecting agencies.
In addition, the Department of Education enumerates these advantages of a monopolized student loan debt collecting agency for its borrowers:
- Simplifying the student loan process
- A single income-based repayment plan making the repayment process less complicated
- Manageable repayment system
- Earlier student loan forgiveness for government employees and NGOs
The monopolization on student loan collection is just a proposal.
But it has several disadvantages that may come with its possible legislation. One of which is it may not be able to handle the massive amount of student loans to collect in the whole of the United States.
Currently, total student loan value in the US amounts to more than a trillion.
And this number may continue to rise before the current student loan collection system expires. Hiring several multiple small agencies to help them do their work is also a possibility.
The chosen or approved collecting agency by the government may fail to keep up with the demands.
This would greatly affect its borrowers.
During the possible transition, complaints and other problems are bound to be inevitable. A single institution might not be able to handle such situations.
Student Loan Debt Collection Monopolization Effects
The Department of Education did not disclose any other information on the effect of such changes.
But having an exclusive debt collecting agency will mean fewer options for student loan borrowers.
Additionally, changes in interest rates of student loan repayments were unclear.
This may also affect the chances of future borrowers. And it can possibly make acquiring a loan suited to one’s financial capacities too difficult.
Changing the current student loan collection system in the US may save the government millions of dollars.
However, it does not guarantee a lighter load or repayment program for its borrowers.
At present, 70% of borrowers in the US are struggling students.
The Young Turks shares insights on the appointed CEO for Student Loan System by the Department of Health:
Are you in favor of the possible monopoly of student debt collection? We would love to hear from you in our comments section.
Paying for student loans can be a struggle. Learn from this article on The Struggle for People with Student Loan Debt.