
Navigating Student Loan Debt Collectors can be a daunting task, but understanding the basics can help you stay on top of your debt.
Student loan debt collectors are required to follow the Fair Debt Collection Practices Act (FDCPA), which prohibits harassment and abusive practices.
If a debt collector is contacting you, they must verify the debt within five days, providing you with a written notice of the amount owed.
You have the right to dispute the debt, and if you do, the collector must stop collection efforts until the debt is verified.
If you're being contacted by a debt collector, it's essential to keep a record of all communication, including dates, times, and the content of conversations.
Student loan debt collectors can't call you before 8am or after 9pm, and they can't contact you at work if you've told them you're not allowed to receive calls there.
Understanding Student Loan Debt Collectors
If you're dealing with a defaulted student loan, you may be asked to pay the unpaid principal balance and interest right away. Collection costs will be added to your loan.
Student loan debt collectors can be tricky to navigate, especially if they're using a name other than their own. PHEAA, for example, was found to be a debt collector under the FDCPA, even though it argued it was exempt as a loan servicer.
If a creditor uses a name that implies third-party involvement, they may be considered a debt collector. This can include using a pseudonym or alias.
Using a name other than its own can have serious implications for creditors. It can make them subject to the FDCPA, even when dealing with student loan debt.
Dealing with Debt Collectors
Dealing with debt collectors can be a daunting task, but understanding your rights and knowing what to expect can make a big difference.
If a debt collector gets involved in collecting your student loans, it will generally add to your loan costs and can be expensive. You're better off working with your loan servicer to prevent your loan from being placed in default.
Know your rights when dealing with debt collection agencies. Review the Office's Debt Collection Fact Sheet and The Credit Handbook for more information.
The U.S. Department of Education has hired over 20 debt collection agencies to assist it in collecting on student loan debt. If a debt collection agency working for the federal government behaves improperly, you should let the U.S. Department of Education know.
You can report improper behavior to the Minnesota Department of Commerce if a debt collector is operating in Minnesota. File a report with the Department of Commerce at 85 7th Place East, Suite 280, St. Paul, MN 55101, or call (651) 539-1600 (local) or (800) 657-3602 (Greater MN only).
If your loan defaults, you'll need to take action to get back on track. The Higher Education Act provides different repayment options and ways to get out of default and back into good standing.
Here are some key consumer protection laws that govern student loan debt collectors:
- The Higher Education Act
- The Fair Debt Collection Practices Act (FDCPA)
- The Fair Credit Reporting Act (FCRA)
- The Telephone Consumer Protection Act (TCPA)
- The Servicemembers Civil Relief Act (SCRA)
- The U.S. Bankruptcy Code
These laws provide a robust set of tools to protect you against harassment from student loan debt collectors.
Federal
The federal government has laws in place to protect you from student loan debt collectors. The Higher Education Act controls all aspects of federally-originated and federally-guaranteed student loans.
You have the right to different repayment options and ways to get out of default and back into good standing under this law. This law provides a safety net to help you manage your student loan debt.
The Fair Debt Collection Practices Act (FDCPA) is the primary federal law governing the collection of consumer debt. It was initially enacted in 1978 to curb abusive debt collection practices.
The FDCPA establishes ethical guidelines for the collection of consumer debts, including student loans. It's essential to know your rights under this law to avoid harassment from debt collectors.
The Fair Credit Reporting Act (FCRA) regulates how student loan collectors report information to credit reporting agencies. This law ensures accuracy in your credit report and prevents errors from harming your credit score.
Student loan collectors must follow the Telephone Consumer Protection Act (TCPA), which limits their ability to contact you by text messages, faxes, and cell phone calls. This law protects you from unwanted and intrusive communication.
The Servicemembers Civil Relief Act (SCRA) applies to members of the U.S. Military who are on active duty. This law allows them to have payments postponed and interest rates reduced on their student loans until after they return from active duty.
The U.S. Bankruptcy Code protects a way to resolve debt problems, including student loans, free from continued collection activity. This law provides a fresh start for individuals struggling with debt.
Bankruptcy Discharge Background
Dominic Miraglia filed for Chapter 7 bankruptcy in 2022 due to outstanding student loan debt with PHEAA.
PHEAA continued efforts at debt collection post-bankruptcy discharge, including making phone calls and failing to update credit reporting agencies to reflect the discharge.
Miraglia alleged that PHEAA disregarded his cease-and-desist request, leading him to file a suit under several consumer protection laws.
The FDCPA and California's Rosenthal Fair Debt Collection Practices Act were cited in Miraglia's lawsuit against PHEAA.
PHEAA argued that it did not meet the FDCPA's definition of a "debt collector" because it was a loan servicer.
The Walls v. Wells Fargo Bank decision was cited in PHEAA's defense, which limits post-discharge claims under the FDCPA.
Consumer Protection
Consumer protection laws are in place to safeguard you from unfair debt collection practices. Debt collectors must comply with both state and federal laws.
The Miraglia case is a landmark decision that clarifies debt collectors' responsibilities after bankruptcy discharge. Bankruptcy discharge can limit certain FDCPA claims, but debt collectors are still bound by post-discharge laws prohibiting harassment and unwelcome communication.
Debt servicers must navigate collection practices with care, respecting state and federal protections. This means being mindful of how they communicate with you and avoiding unwelcome contact.
Compliance is key, and debt collectors and servicers must take this seriously. The Miraglia case serves as a critical precedent, reminding them that ignoring consumer protection laws can have consequences.
Specific Debt Collectors
If you're dealing with student loan debt collectors, you should know that they can refer your debt to a collection agency. Collection costs will be added to your loan.
Once a loan is in default, you may be asked to immediately pay the unpaid principal balance and interest. This can happen quickly, so it's essential to stay on top of your payments.
Your debt may be referred to a collection agency and collection costs will be added to your loan, which can increase the amount you owe.
Private
Private loans can go into default much sooner than federal loans, often due to incidents described in the loan contract, such as the borrower's death or bankruptcy.
Your private loan may also default if you or your cosigner break promises made in the loan contract.
If you're dealing with private loan debt, it's a good idea to contact a debt attorney to discuss your options for relief from collection harassment.
The debt attorneys at McCarthy Law offer a free consultation to discuss potential strategies for gaining relief from aggressive collection attempts, and can be reached at (855) 976-5777 or online.
If Navient Corp. contacts you about private loan debt, you have certain legal rights, and contacting the experienced debt settlement attorneys with McCarthy Law can be a valuable first step in navigating the situation.
Navient Complaints and Lawsuits
Navient has faced numerous complaints and lawsuits over the years, with tens of thousands of complaints received from 2011 through 2017.
The company received more complaints than any other student loan lender in 2017, with 4,185 private complaints and 6,708 federal complaints.
Navient was also accused of making debt collection attempts from co-signers to a loan after the student in question suffered an accidental death.
In addition, the company was required by the federal government to repay $22.3 million after its predecessor parent company Sallie Mae overcharged the U.S. government in a scandal dating back decades.
Navient has also been accused of failing to divert teacher loans into public forgiveness plans.
Government Agencies and Actions
The Consumer Financial Protection Bureau (CFPB) has been actively policing unlawful student debt collection practices, as seen in their consent order with a debt collection agency.
This agency was banned from servicing or collecting on any student loan debt due to their improper practices.
The CFPB found that the company's tactics caused borrowers to incur costs amounting to 16% of their outstanding loan balances plus additional interest charges over time.
A $700,000 penalty was paid to the CFPB's victims relief fund to help redress the financial harm suffered by borrowers.
The CFPB's actions highlight their commitment to protecting consumers from unfair and abusive practices in the student loan debt collection industry.
Frequently Asked Questions
What happens if you never pay off student loans?
Defaulting on student loans can severely damage your credit rating and limit future borrowing opportunities. The government may also take action to collect the debt by garnishing your wages, tax refunds, and other government payments.
What is the 7 year rule for student loans?
Defaulted student loans remain on your credit report for 7 years, impacting your creditworthiness for other loans and credit applications
Will student loans be garnished in 2024?
During the on-ramp period in 2024, the Department of Education will not garnish wages or report delinquencies, but credit scoring may still be affected.
Sources
- https://www.ag.state.mn.us/consumer/Handbooks/StudentLoans/CH10.asp
- https://www.moneywiselaw.com/collectionrights/
- https://www.consumerfinanceandfintechblog.com/2024/12/cfpb-bans-debt-collection-agency-over-student-loan-abuses/
- https://www.moneywiselaw.com/student-loan-debt-collection-after-bankruptcy-miraglia/
- https://mccarthylawyer.com/creditor/has-navient-contacted-you-regarding-collections-on-student-loan-debt/
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