Cutting Commissions to Student Loan Debt Collectors is Not the Answer

Rob Norwood,
Array Services Group

This piece from Bloomberg.com seems needlessly combative, especially on touchy subjects like student loans and student debts. The conclusion may be valid — more on that in a moment — but how we should get to that conclusion should be more, not less, collaborative.

To begin with, the article suggests that those of us who collect student loans are out “to squeeze borrowers.” This is in reference to a recent decision by President Obama to cut commissions paid to private collection companies. Other verbs used in that opening paragraph: “slashed” and “chase.” The article wants to create a contentious relationship where there doesn’t need to be one at all.

The article quotes Persis Yu, a staff attorney with the National Consumer Law Center: “It will make life easier for borrowers. We’re not setting people up to fail.”

This may or may not be the case — but cutting commissions to the collection agencies who collect on these unpaid debts isn’t the same thing as helping students not fail financially. Collectors are an easy “villain” to point to; however, the issue isn’t really the collectors or the commission. It’s poor financial literacy on the part of students and parents who bite off more debt than they can chew.

The missing point in a lot of these articles — and there will be more of these articles to come from the mainstream press — is that the debt is legitimate. This is money that is owed to a lender. Articles, such as this one, paint the student debt collection industry as opportunistic; that we’re earning commissions on spurious debt. And in doing so, they unfortunately, and perhaps unwittingly, underplay the real issue: an intrinsic lack of understanding about money, credit, debt, and responsibility.

Students should not be penalized for getting an education. But they should also be held accountable for their financial decisions. Student loan collectors can work with students on payment plans. The relationship does not have to be as antagonistic as this piece suggests. 

About Rob Norwood

Rob Norwood has over 18 years of experience managing client relationships and contracts, including eight years in the college and university market. He is certified as an ACA Collection Specialist and Higher Education Collection Specialist.

About Array

Array Services Group and its three innovative business units – CareCall, ProSource and J.C. Christensen & Associates – offer professional services in call management disciplines, accounts receivable and revenue cycle management, empowering clients for immediate and future success.