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January 6, 2014

Fed’s Debt Collector Scrutinized for Overly Aggressive Tactics

As many of you know by now, Heather is not a big fan of private student loans, considering their lack of borrower protections and flexibility when it comes time for repayment.  Borrowers of federal student loans enjoy many benefits including fixed interest rates and a number of income-based repayment plans to select from for repayment.  Bottom line, federal student loans are almost always preferred to private ones.  

For a more complete comparison of federal versus private student loans, click here.

But, as with everything in life, there's a catch.  The federal government has many more tools in its toolbox to receive payment for defaulted student loans.  From wage garnishments to seizing federal tax refunds, the federal government can and will ensure that borrowers repay their federal loans or satisfy the requirements of income-based repayment plans or loan forgiveness plans before settling a debt.  So while the federal government offers many more ways to repay one's debt, one's debt will be repaid - one way or another.  This brings us to the Educational Credit Management Corporation (ECMC).  

Founded in 1994, Educational Credit is the primary private entity contracted by the U.S. Department of Education to fight borrowers' attempts to discharge federal student loans through bankruptcy, according to a recent New York Times' article written by Natalie Kitroeff.  In the article, Kitroeff exposes some of the abusive collection tactics employed by ECMC to aggressively recoup defaulted federal student loans.

The takeaway in our opinion is this: federal student loans are great in terms of their favorable interest rates, flexible repayment plans, and expanded educational opportunities that they provide to millions of students who may not be able to afford an education without them.  But they are loans that must be repaid.  The income-based repayment plans and loan forgiveness programs are only effective if borrowers know of their existence and take advantage of them.

To read Kitroeff's article on ECMC's abusive debt collection tactics, click here.
To get a grip on your own student loans, click here.

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