Recently it was reported in the news that the Obama administration wants to pass a law that allows 3rd party parasites (3rd party collections agencies) to be able to use robo-callers to call the cell phones of people in default.
BAD IDEA.
In America, unlike other parts of the world, a person in the US pays for Cell Phone Minuets for both incoming and outgoing calls. The result of this is telemarketers and 3rd party collectors are not allowed to call these numbers.
Some want to switch the American system to one like that of many European systems, where the person only pays for outgoing calls. This would allow the telemarketers and others to call the cell phone numbers.
There is just one problem. Many people switched to cell phones BECAUSE they do not allow telemarketers to call. The so called "do not call list" is not working the way it should and many have found that having a cell phone is just as good as having one home phone.
In the case of student loans, many people in default have pre-paid phones. These phones require you to purchase minuets ahead of time. Many of these people use the phones for emergencies only, or when they are trying to find work.
IF the Obama administration gets its wish, the 3rd party parasites robo callers will be able to tie up a line with constant calling. And unless the person can block the call, or set a specific ringer to it, they will end up answering the call - and doing that costs them Minuets. Even a 5 second answer to find out its a robo call, costs the cell phone user 1 full minuet. In effect, this law would allow the government to steal resources (property) from a defaulted student, without having a court order.
The Obama Administration knows, that due to the dismal economy, many students are defaulting simply because there are no jobs. So instead of helping these students, the administration is victimizing them.
And for students who have been in default for a long period, this is just another of and endless attacks on them by the US government.
Time for it to end. It is time for the government to address the problem and help the students instead of further persecuting them.
Thursday, October 6, 2011
A billion dollars wasted on 3rd party parasites - private collections agencies
http://government.brevardtimes.com/2011/10/us-taxpayers-give-billions-to-student.html
Tuesday, October 4, 2011
U.S. Taxpayers Give Billions To Student Loan Collection Contractors For No Reason
The U.S. Government paid over $2 billion to private debt collection contractors to collect just under $1 billion for Fiscal Year 2011.
U.S. taxpayers are needlessly losing billions of dollars each year in collections costs that the U.S. government could be collecting without the help of private debt collection contractors.
According to the most recently available data, total student loan debt in collections that was collected for FY 2011 as of July 2011 amounted to $10,410,993,183.
Of that amount:
1. 42% was rehabilitated into a non-defaulted loan;
2. 25% was consolidated into a Direct Federal Loan.
3. This leaves 33% that had to be collected by Administrative Wage Garnishment, Treasury Offset (taking a borrower's income tax refund), and regular collections.
4. The most amount collected was by Treasury Offsets 16% at $1,609,108, 522, followed by Regular Collections 9% at $973,874,789, then Administrative Wage Garnishments 8% at $849,332,994.
So without the expense of contracting private collection companies for regular collections, the U.S. Government would have received $2,458,441,516 into the U.S. Treasury.
But since those are defaulted loans, the amount collected first goes to the private contractors who hold the debt contracts even if they didn't have a hand in actually collecting the money.
According to the Department of Education's website:
"Pursuant to the Higher Education Act and the terms of most borrowers' promissory notes, you are liable for the costs of collecting your defaulted Federally-financed student loans.
The largest of these costs is usually the cost of contingent fees that may be incurred to collect the loan.
The Department gives you repeated warnings before it refers a debt to a collection contractor.
If those warnings do not persuade you to reach repayment terms on defaulted loans, the Department refers those loans to collection contractors.
The contractors earn a commission, or contingent fee, for any payments then made on those loans.
The Department charges each borrower the cost of the commission earned by the contractor, and applies payments from that borrower first to defray the contingent fee earned for that payment, and then to interest and principal owed on the debt.
As a result, the amount needed to satisfy a student loan debt collected by the Department's contractors will be up to 25 percent more than the principal and interest repaid by the borrower.
On each billing statement, the Department projects an estimate of the total amount needed to satisfy the debt on the date of the statement, including collection costs that would be incurred by payment in full of that amount." (Emphasis Added).
So while Obama was hailed for cutting out the middle man by offering direct student loans to college students, he certainly made it up with the graft given to private debt collection companies.
It is obvious that this is the next middle man that must be cut out of the student loan program.
Termination or restructuring of these contracts would immediately bring in an additional $1 billion into the U.S. treasury.
Statistical Source: http://www.fsacollections.ed.gov/contractors/ga/stats/090611.htm
U.S. Dept. of Ed. payment policy: http://www.fsacollections.ed.gov/contractors/ga/stats/090611.htm
Tuesday, October 4, 2011
U.S. Taxpayers Give Billions To Student Loan Collection Contractors For No Reason
The U.S. Government paid over $2 billion to private debt collection contractors to collect just under $1 billion for Fiscal Year 2011.
U.S. taxpayers are needlessly losing billions of dollars each year in collections costs that the U.S. government could be collecting without the help of private debt collection contractors.
According to the most recently available data, total student loan debt in collections that was collected for FY 2011 as of July 2011 amounted to $10,410,993,183.
Of that amount:
1. 42% was rehabilitated into a non-defaulted loan;
2. 25% was consolidated into a Direct Federal Loan.
3. This leaves 33% that had to be collected by Administrative Wage Garnishment, Treasury Offset (taking a borrower's income tax refund), and regular collections.
4. The most amount collected was by Treasury Offsets 16% at $1,609,108, 522, followed by Regular Collections 9% at $973,874,789, then Administrative Wage Garnishments 8% at $849,332,994.
So without the expense of contracting private collection companies for regular collections, the U.S. Government would have received $2,458,441,516 into the U.S. Treasury.
But since those are defaulted loans, the amount collected first goes to the private contractors who hold the debt contracts even if they didn't have a hand in actually collecting the money.
According to the Department of Education's website:
"Pursuant to the Higher Education Act and the terms of most borrowers' promissory notes, you are liable for the costs of collecting your defaulted Federally-financed student loans.
The largest of these costs is usually the cost of contingent fees that may be incurred to collect the loan.
The Department gives you repeated warnings before it refers a debt to a collection contractor.
If those warnings do not persuade you to reach repayment terms on defaulted loans, the Department refers those loans to collection contractors.
The contractors earn a commission, or contingent fee, for any payments then made on those loans.
The Department charges each borrower the cost of the commission earned by the contractor, and applies payments from that borrower first to defray the contingent fee earned for that payment, and then to interest and principal owed on the debt.
As a result, the amount needed to satisfy a student loan debt collected by the Department's contractors will be up to 25 percent more than the principal and interest repaid by the borrower.
On each billing statement, the Department projects an estimate of the total amount needed to satisfy the debt on the date of the statement, including collection costs that would be incurred by payment in full of that amount." (Emphasis Added).
So while Obama was hailed for cutting out the middle man by offering direct student loans to college students, he certainly made it up with the graft given to private debt collection companies.
It is obvious that this is the next middle man that must be cut out of the student loan program.
Termination or restructuring of these contracts would immediately bring in an additional $1 billion into the U.S. treasury.
Statistical Source: http://www.fsacollections.ed.gov/contractors/ga/stats/090611.htm
U.S. Dept. of Ed. payment policy: http://www.fsacollections.ed.gov/contractors/ga/stats/090611.htm
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