Education Department Cuts Ties With Student Loan Debt Collection Agencies

The department has been sharply criticized in the past for what some allege is a problematic partnership with debt collection agencies.

Andrew Burton / Reuters

The Department of Education announced late Friday that it had cut ties with five debt collection agencies that it says have been providing inaccurate information to student borrowers. One of those agencies is Pioneer Credit Recovery, a massive subsidiary of the publicly traded Navient Corporation, which is among the department's largest debt collectors.

The department has been sharply criticized in the past for what some allege is a problematic partnership with debt collection agencies, who the government pays $1 billion each year to chase after student borrowers who are delayed on their loans.

A report by the National Consumer Law Center found that Navient's Pioneer Credit Recovery had among the highest levels of complaints from borrowers, but had received a performance bonus of more than $2.5 million from the government. Navient split from the student loan giant Sallie Mae last year. A 2012 Bloomberg article found that Pioneer Credit had used ruthless tactics to extract payments from borrowers, even those who were eligible for relief.

A review of debt collections agencies, the Department of Education said, found that Pioneer Credit and four others had given borrowers inaccurate information about the department's loan forgiveness program at "unacceptably high rates." Because of incentive-pay structures, debt collectors made less money for students who entered loan forgiveness programs than for those who made payments, according to the National Consumer Law Center Report.

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