Editor’s Note:
Today we are running the tenth segment of the 15-part series on college-student-loan debt. (Thank you to onlinecolleges.net for putting this together.)
Collection agencies have little incentive to change because many receive huge commissions.
Government contracts and Education Department data showed that in 2011, collection agencies working for the government earned about $1 billion in commissions. Some agencies earn as much as 16% of the entire loan amount for rehabilitating a loan, a reward that’s only earned by getting borrowers to repay a minimum of .75% to 1.25% of the loan each month. It’s easy to see how this structure could result in misleading practices. In some cases the commissions for loan debt collectors have gotten wildly out of control, with some earning as much as $450,000 a year in bonuses. In light of recent criticism, the Education Department is considering changing the commission structure in its contracts, but for now, it’s still a factor that motivates many debt collectors to do anything and everything they can to ensure borrowers pay amounts that will earn them big bonuses. READ MORE HERE