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House Bill Would Make Major Changes in Student-Loan Debt Collection


The Chronicle of Higher Education - December 5, 2012

A bill that Rep. Thomas E. Petri plans to introduce as soon as this week would essentially eliminate the Education Department’s need to hire private agencies to collect student-loan debt, by replacing that system with automatic withdrawals from borrowers’ paychecks. Debt-collection agencies working on the Education Department’s behalf have seen complaints against them rise sharply in recent years, as critics have complained that their tactics place undue burdens on borrowers.

The new arrangement, which is similar to programs in Australia and Britain, would cap borrowers’ payments at 15 percent of their income after basic living expenses. It would also cap interest owed on the loan at half the loan’s face value at the time of graduation.