Time to end abusive collection practices on student loan debt
Commencement season is upon us. The universities are wrapping up and commencement speeches are in the news. Our high school students will be graduating, then heading off to college in the fall. Achievements will be touted, future possibilities explored. At such moments, optimism and potential opportunity reign within each new graduate, as it should.
Yet, missing from the conversation and all that optimism is a pall no one talks about: the long grind ahead most our college graduates have to pay, or rather, repay, for their educations. The hole of debt they incur with their scholastic achievements is one that, for many, takes a lifetime of digging to pull themselves out.
The numbers are staggering. Currently, over $1.5 trillion in student loan debt exists in the United States. Graduates this year will be leaving school with an average student loan debt of $39,400 dollars. Over 44 million Americans owe money on student loans.
To put this in perspective, I came across some examples that give us an idea of the scope. In Australia, $1.5 trillion is more than the annual salaries of all working Australians combined. That figure is more than the gross domestic product of Washington, Oregon, Idaho, Montana, Colorado, Utah, Arizona, and Nevada. That figure is more than the combined credit card debt of everyone in the United States. It’s even more than everyone in the United States owes on their cars.
Instead of owing a debt to the benefits of education, we have a lot of debt we owe for education.
The federal government receives the interest on the loans, and a lot of debate and Politifact articles go into whether the government makes or loses money on student loans. On the campaign trail, President Trump told The Hill: “That’s probably one of the only things the government shouldn’t make money off — I think it’s terrible that one of the only profit centers we have is student loans.”
The reality is this: due to arcane budget accounting strategies, the Government Accountability Office indeed projects billions of dollars in profits from student loans. The more pessimistic Congressional Budget Office projects that student loans will probably cause a financial loss for the government. Basically, no one really knows the future, because student loans can take up to 40 years to pay back, so it’s all conjecture.
But guess which prediction Congress used in its decision concerning government spending? That’s right: the optimistic approach. That means the projected profits President Trump roundly criticized during his campaign have already been spent. This complicates any efforts to provide relief to people struggling to pay back their student loans.
When debt goes bad, debt collectors are used. And if you think banks are cranky about their money, wait until government contractors contact you about your student loan debt. It got so bad, that the United States had to sue Sallie Mae for its collection efforts against members of the military, and won a $60 million settlement for abusive collection practices.
Various states’ attorneys general have received numerous complaints about student loan servicers: 1) inconsistent answers from different collectors about what is owed, 2) inaccurate and erroneous billing, 3) improper application of payments, 4) incorrect credit reporting, 5) hiding or ignoring repayment options, 6) refusal to work out payment plans, and 7) abusive collection calls.
Many states have passed laws to prevent the abuses by the federal government’s contracted, private debt collectors. Recently, Betsy Devos and the Department of Education stated that federal rules dictate that state consumer protection laws don’t apply to private-sector student loan companies collecting for the federal government. The Executive Branch, through the Department of Education, is ignoring the Higher Education Act passed by Congress, but also attempting to preempt state law by protecting the student loan companies from state laws. It was so bad that 25 of the 50 states attorneys general wrote Betsy Devos, objecting to her actions.
I learned about all of this because of two of Utah’s own members of the House of Representatives, Rob Bishop and Mia Love, who joined with two other members in Congress to send letters to Betsy Devos. It’s an awesome display of Congressional power responding to overreaching by the Executive Branch.
The letter also provides insight into the power dynamics between the federal and state levels. Reps. Bishop and Love certainly come down on the side of state’s rights. The letter is a primer for states in challenging the action by the Department of Education. And I agree with them wholeheartedly. The individual state’s should be allowed to protect their citizens from abusive collection practices, no matter who funds them.
Unfortunately, our state legislators have yet to pass any legislation protecting consumers from abusive collection practices on a state level. So, while Bishop and Love are fighting the good fight for Utah to protect its citizens, it won’t do any good unless our state legislature actually passes laws to protect us from abusive student loan collection practices.
Maybe it’s time for Utah to educate itself and graduate into a more optimistic future, not only for debt-saddled college graduates, but for all of the state’s consumers as well.