What Does Everyone Think of the Student Loan Collection Sector Now?

Late last year, we asked our readers their opinion on the viability of the student loan debt collection sector in light of certain developments.

Of particular interest at the time was the news that the U.S. Treasury Department is readying a pilot program to take over the collection of some defaulted student loan accounts from the Department of Education, essentially removing the work from contracted private debt collection agencies. And, of course, there were recent developments in regulation, with the CFPB taking a very hard look at student loan debt collections.

On the other side of the equation, ED had just announced contract awards for small business vendors on its student loan debt collection contract. So there was some good news.

When we asked readers fairly bluntly, “How Safe is the Student Loan Collection Sector?” and supplied answers conveying different levels of concern, we got a wide range of opinions:

• Still very safe; the volume is not going away – 29.3%
• Somewhat safe; there’s plenty to share – 14.5%
• We’ll have to wait and see – 13.6%
• I’m a little worried about private collectors losing accounts – 21.3%
• This is a definite problem and I would not invest in student loan infrastructure – 19.5%
• Other – 1.8%

The “Other” responses mostly focused on ED’s impending contract awards to unrestricted (or larger) ARM companies, something that has yet to happen.

But there have been a lot of developments in the student loan space since we ran this poll. There were official signs that ED’s contract award for larger collection agencies would be delayed even further into this year. There was a ton of scrutiny on the proposed acquisition of dozens of for-profit college campuses by the parent company of an ED collection contractor.

Of course, there was the news that ED is abruptly ending its contract with five debt collectors, and the subsequent fallout from that decision.

In a move that might have the broadest impact on the future of the student loan debt collection space, President Obama this week announced a Student Aid Bill of Rights and directed several agencies to help Americans repay their student loan debt. In the media coverage surrounding that announcement, the Treasury Department once again reiterated that it was launching a pilot to bring some student loan collections into its office.

So with all that, what does the industry think of this market sector going forward? We’re asking the exact same question we asked last year; it will be interesting to see how the results might vary.

Take the poll below: