Dept of ED Releases Debt Collection Contract Performance Report for February

The U.S. Department of Education this week released performance rankings through February for its student loan debt collection contract, as Congress passed a rider to the healthcare reform bill that will dramatically alter the landscape of student lending in the country.

On the unrestricted contract – reserved for the largest collection agencies – Pioneer Credit Recovery once again took the top spot with an overall score of 96.70. Pioneer is a division of student loan giant Sallie Mae. NCO Group, the largest accounts receivable management company in the world, took a distant second place with 77.27 points. Van Ru Credit Corp. trailed NCO with 73.53 points for third.

ED’s performance scores are based on a weighted average of performance metrics, including total dollars collected, total accounts serviced and administrative resolutions. The top performer in each category receives the maximum score for that category, with the other agencies scored against the top performer. There are 70 points available for dollars collected, 20 for total accounts serviced, and 10 points up for grabs in the administrative resolution category.

Pioneer led the unrestricted contract in both the dollars collected and accounts serviced categories, while The CBE Group led the way on administrative resolutions.

On the small business set aside contract, Coast Professional, Inc. led the way with a total score of 90.71, followed by a close race for second between Collection Technology, Inc. (81.95) and Delta Management Associates (81.14). Coast Professional led in the total dollars collected category while Collection Technology took the top spot in accounts serviced and administrative resolutions.

The performance scores are released by ED each month, but compiled for internal scoring on a quarterly basis. Final quarterly rankings determine bonuses and account placement levels. The current period covers performance for five months – November 2009 through March 2010 – because the first accounts were transferred to agencies on the new contract in early November. If the contract pattern holds, ED will determine account placement levels after the scores for March are released. Currently all collection agencies in the two respective contract classifications (unrestricted and small business) have the same number of accounts.

The Complete Rankings

In the first four months of the 2009 student loan debt collection contract, the 22 agencies have brought in $33.2 million for ED.

The collection contract performance rankings were released the same week as a massive overhaul of the student loan market was approved by Congress. A provision attached to the healthcare reform reconciliation bill eliminates the Federally-backed private student loan market, converting all Federally-backed loans to Federal direct loans.

Under the old scheme, private lenders – such as Sallie Mae, Nelnet and Chase – made loans to college students that were guaranteed by ED. If those loans went into default, the banks transferred the loans to ED, who then placed them into the collection program. Now, there will be no private lenders in that sector of the student loan market.

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