U. contract with debt collector focuses on defaulted payments
The company appointed by the University to help students pay off loans has come under fire for its collection methods.
Student loans now account for more than $1 trillion in debt, an amount larger than credit card debt in this country, according to John Connelly, president of the Rutgers University Student Assembly, on studentlabor.org.
If a University student defaults on a loan with Sallie Mae — the leading provider of student loans — the University will forward the account to the Sallie Mae subsidiary General Revenue Corporation, which specializes in debt collection, said GRC Spokeswoman Patricia Christel.
She said the GRC provides services to approximately 1,100 colleges and universities.
“To supplement the efforts of the university’s internal accounts receivables team, the GRC works one-on-one with former students to help them identify payment plans that meet their financial obligations to the university and its [current] and future students,” she said.
The GRC is currently in the middle of a lawsuit, Olivea Marx v. GRC.
The U.S. Supreme Court heard Marx v. GRC on Nov. 7, 2012, according to the Supreme Court calendar, but the court has not yet decided on the lawsuit. Marx appealed to the Supreme Court after the U.S. Tenth District court dismissed her case.
According to the U.S. Court of Appeals Tenth Circuit document, Marx does not appeal the decision of the district court finding that the GRC’s collection practices are not abusive and threatening. She contests the court’s conclusion that the GRC did not violate the Fair Debt Collection Practices Act by sending her employer a fax.
If the Supreme Court decides in her favor, the number of lawsuits facing debt collection agencies could skyrocket, according to the Legal Information Institute.
Christel said the GRC has a rigorous compliance and training program in place to ensure that all agents comply with applicable state and federal laws and regulations, including FDCPA. The GRC is also an outstanding member of the Better Business Bureau.
“GRC’s operations have achieved and maintained an “A” rating by the Better Business Bureau for many reasons, including low complaint volume and outstanding complaint resolution rate,” she said. “The BBB has rated GRC since 1986.”
Despite the “A” rating from the BBB, they currently have 325 closed complaints with the BBB in the last three years, and 82 in the last 12 months, according to the BBB’s website.
“GRC was selected by Rutgers University to recover federal Perkins student loans and other institutional receivables owed by former students,” she said. “The accounts referred to us are those of individuals who are at least 9 months past payment, and who have not responded to earlier attempts by the University.”
Any university that participates in the Federal Perkins Loan program is required by the Department of Education to use a third party collections agency to attempt to recover defaulted loans, she said.
Christel said while there are some unhappy former students who have fallen into debt, they have had no complaints from former students of the University.
“It’s important to note that the vast majority of individuals who borrow student loans successfully manage their repayment,” she said.
E.J. Miranda, a spokesman for the University, said repayment is necessary to help future students.
“Students who do not repay their Perkins loans are, in effect, taking funds from currently enrolled students,” he said. “If we are unable to collect the funds, we have fewer dollars to lend to current students who are in need.”
Marios Athanasiou, a member of the Rutgers Student Union, said that while the GRC may not have any complaints from former University students, they do not agree with using them to collect debt.
“Last semester we were just trying to raise awareness about their collection efforts,” Athanasiou, a School of Arts and Sciences sophomore, said. “[RSU] still wants to ensure that we have contracts with companies that hold themselves to the same standards the University prides itself on.”
Athanasiou said the RSU took an interest in the GRC’s practices after reading horror stories of allegations from other universities’ former students who have dealt with the GRC.
“There are stories of harassment, violations of the FDCPA, the [Telephone Consumer Protection Act] and Alabama State law,” he said. “Our concern is using a company with these allegations against it.”
Miranda said though GRC only joined Sallie Mae in 2005, the University has had a contract with the GRC for more than 20 years, and has never heard of any complaints against the GRC.
“If students have questions or issues regarding the company, they should bring those concerns to the attention of the Office of Student Billing and Loan Collections,” he said.
Miranda said while some students do fall into debt, most pay on time and don’t have to worry about dealing with a collection agency.
“Rutgers has an agreement with the [GRC] to assist in collections only in those rare instances when former students have defaulted on their federal student loans and are seriously delinquent on their tuition debt,” he said.