Avenues for Loan Default Repayments Need to Be Reopened
Your magazine has reported the efforts by the Department of Education to crack down on student loan defaulters and schools with high student loan rates (see Black Issues, Sept. 16, 1999). While these efforts are commendable, there has been little scrutiny and criticism of the reality behind student loan collection efforts.
It is my understanding that the Higher Education Amendments of 1992, 20 USC § 1078-6(b), require guarentee agencies, the Department of Education and collection agencies operating in their behalf to set up a repayment plan by which a borrower in default can make reasonable and affordable payments to renew his or her eligibility based upon financial circumstances. Based on my experience with the student loan from Tufts University, I have found that such remedies are not available in practice. In my case, a small clerical error regarding loan deferments snowballed into full-blown litigation. My attempts to set up a repayment plan as provided by federal law have fallen on deaf ears. I believe that the efforts by the Department of Education have unintentionally provided a perverse incentive not to settle cases to the benefit of both the schools and the student borrowers. In my experience, collection agencies have no incentive to settle cases or offer repayment plans because they have the expectation of collecting larger fees if the case goes to litigation.
Moreover, attorneys who litigate student default loan cases have an incentive not to settle the cases or to provide a repayment plan because they prefer to bill as many hours as possible.
I would urge the Department of Education and your readers to provide avenues for the settlement of student loan default cases other than litigation. Otherwise, I believe that minority students like myself are going to bear the brunt of ill-intentioned lawsuits.
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