US student loan debt persists despite initiatives

A conflict is brewing in Washington over how much power companies, who are collecting on student loans, should have to contact borrowers. On the one hand, those hired to collect the student loan payments argue they can better help the struggling borrowers if they are given more leeway with them, while on the other hand, lawyers says these firms harass the borrowers. As this rages, the elephant in the room is that despite the government providing a series of programmes to help borrowers make manageable payments on their loans and announcing that now "there's no reason for anyone to default", around one in four student loan borrowers are still struggling to stay current on their debt. For example, despite a big PR push regarding government initiatives allowing student loan borrowers to make student loan payments tied to income, most of those borrowers who would benefit are not using them. Student debt in the US has tripled over the past decade to $1.232tn, and now accounts for a larger share of household debt than credit card, auto loan and all other debt excluding mortgages. 

A battle is brewing in Washington over how much power companies collecting on student loans should have to contact borrowers.

Contractors hired by the Obama administration to collect student loan payments are one side, arguing that they can better help struggling borrowers if given more leeway to contact them. On the other side are consumer advocates and lawyers, who say these firms harass borrowers—and even those who don’t have government-backed debts—on the premise that they’re trying to inform them of their options.

The stakes are high. Roughly one in four student loan borrowers is struggling to stay current on their debt, even though the government provides a slew of programs for federal borrowers to make manageable payments on their loans. Allowing companies to robo-dial borrowers’ cellphones without their express consent increases the odds that a struggling borrower finds out about one of these programs, the servicers argue. But consumer advocates say that excessive robo-dialing can border on harassment, constantly interrupting people during work or at other important times. In the last three months of 2012, the Federal Trade Commission received more than 200,000 complaints about robo-dialing a month.

Student loan servicers caught a break last year when Congress tucked a provision into the budget bill, which allows firms collecting on government-owned or back debt—the bulk of student loans—to robo-dial borrowers on their cellphones without express permission, something which is normally prohibited under the Telephone Consumer Protection Act.

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The Federal Communications Commission, however, pushed back. The FCC, which is in charge of implementing the new law, issued a proposed rule earlier this month that if adopted, will place some limits on these companies’ power to robo-dial borrowers. These include a limit of three robocalls per borrower a month, a ban on calling cellphones that don’t belong to a debtor, a limit on only calling delinquent borrowers as well as allowing borrowers to revoke consent to be called.

Officials at the Department of Education, which initially urged Congress to pass the exception to the TCPA, appear satisfied with the proposed rule. Kelly Leon, a spokeswoman at the Department, said in an email that the FCC’s proposal “strikes a common sense balance,” of allowing loan servicers to reach borrowers and help them manage their debt, while still protecting them against harassment.

“There’s no reason for anyone to default,” said Leon, noting the Obama administration’s suite of programs that help borrowers to manage their debt. “But we can only help borrowers avoid default—and the harm it can do their finances—if we can reach them.”

Consumer advocates applauded the limits the FCC placed on robocalls to student loan borrowers, though they were cautious to note that the proposed rule still allows companies collecting on government debt to robo-dial borrowers without their consent. They also expressed concern that the limits may not stick. Stakeholders, including both industry players and consumer advocates, now have until June 6 to submit comments on the FCC’s proposed rule. Their feedback may be incorporated into a final law.

“We’re very pleased with the proposals that the FCC indicates that it’s making,” said Margot Saunders, an of-counsel attorney at the National Consumer Law Center. “We hope that they hold onto it, we know that they already have gotten and will continue to get tremendous pressure,” from industry players to water down the consumer protections in the proposed rule.

Indeed, a coalition of trade groups representing student loan servicers took issue with some of the FCC’s limits, particularly the three call restriction and the requirement that calls be limited solely to delinquent borrowers. If companies are limited to three calls, instead of three live connections, they may never reach a borrower they’re trying to help, said James Bergeron, the president of National Council of Higher Education Resources, which counts student loan servicers and debt collectors as members.

What’s more, by limiting the calls to delinquent borrowers, the FCC is making it more difficult for servicers to reach borrowers who may not yet be behind on their payments, but may need assistance enrolling in or staying in income-driven repayment programs, which can help borrowers make their loan payments more manageable. “From our perspective we were pretty disappointed in the rule and believe it’s a missed opportunity to help students and families,” Bergeron said.

Lawyers for borrowers outline previous violations

When Congress first voted to exempt companies collecting on government-backed debt from obtaining consent to robo-dial borrowers’ cellphones, Octavio Gomez, a Florida-based attorney at law firm Morgan & Morgan, was initially concerned it would give the companies “free rein to just go crazy.” Now, he’s happy to see “these companies are being somewhat limited because they are some of the biggest abusers,” of the TCPA, he said.

His firm has been involved in two suits over the past year against Navient, one of the biggest servicers of federal student loans, which featured troubling allegations of violations of the TCPA. Both recently settled. In one suit filed in February, a borrower claimed in court documents that Navient used a robo-dialing device to call her cellphone dozens of times including when she was visiting her husband in the hospital as he was suffering from stage four cancer, the day that he died and the day of his funeral, despite her repeated requests to stop the calls.

In the other case, Willie McCaskill, a Florida pastor, claimed she received more than 700 calls from Navient over her daughter’s student loan. McCaskill testified that over the course of the hundreds of calls she only answered the phone once to tell the company to stop calling, according to court documents.

From the testimony: “I asked her not to call my cellphone anymore about a student loan. I told [Navient staffer] Heather I have never had a student loan in my life and I don’t have anything to do with anybody else’s loans. Not at all. And the call ended. And then after that I was just bombarded with phone calls.”

The company said it didn’t have any records of a conversation between McCaskill and a staffer named Heather, according to court documents. Navient also argued that McCaskill’s daughter provided consent for the company to call the number by providing it as a contact number on Navient’s website in 2014, even though the company acknowledged that it found the number originally through a public records search that turned up a cover letter for an application she sent in 1999 to the Florida Division of Corporations to incorporate her church, according to court documents.

Patricia Christel, a Navient spokeswoman, said the company wouldn’t comment on litigation, but added, “We do have a robust set of policies and systems designed to ensure that we follow customer preferences with respect to automated mobile calls.”

Student loan servicer says robo-dialing helps

Navient officials wrote to the FCC in March urging the agency not to propose a limit on the number of robocalls student loan servicers can place to borrowers, arguing it is still premature to do so. If the agency wanted to place a limit on the calls, it should be on live connections, not simply calls placed, company officials said in the letter.

Navient cited a slew of its own data in the letter indicating that the company’s ability to contact borrowers is key to helping it get students to pay their debt. Nine out of 10 times when the company reaches a borrower late on her payments the company can help her avoid default. Roughly 90% of Navient borrowers who do default either didn’t reach out to the company or respond to the company’s attempts to contact them. What’s more borrowers who are struggling are less likely to give their permission to receive cell phone calls from the company; 93% of borrowers who are current have given Navient permission to call their cellphone compared to 76% of delinquent borrowers and 50% of defaulted borrowers. “The only borrower we can’t help is one we don’t reach,” Christel said. “Contact is key.”

Robo-dialing a cellphone can be an effective way to reach struggling borrowers who don’t have a landline (a large and growing share of the population) or whose address may have changed since they originally took out the loan, servicers have argued. With so many borrowers struggling to pay off their student debt, the government and servicers say they have to use all of the tools at their disposal to help borrowers experiencing difficulty paying back their loans, including robo-dialing.

The Obama administration has been using social media, dedicated websites, employers and others to get the word out about government plans that allow student loan borrowers to make student loan payments tied to income. Despite the PR push, many borrowers who could benefit from the plans still aren’t using them, officials say.

But consumer lawyers say that firms have often used robo-dialing in such a way that it borders on abuse. Saunders, of NCLC, said the disruption that results from robo-dialing ranges from interrupting important work meetings to distracted driving. While it’s possible for cellphone users to block the calls, they can still be disruptive. “These companies have proven the model that you call people a bunch of times and harass the hell out of them, you can get paid doing that,” said Billy Howard, an attorney at the Consumer Protection Firm, who represented McCaskill. “This harassment makes people panic and pay a bill that either they don’t owe or shouldn’t be paying just to stop the phone calls.”

For now, it appears that even though companies that collect student loan debt will be able to robocall borrowers without their permission that power will be subject to some limits. Saunders said she’s hopeful the rule will retain the FCC’s proposed limits, including that companies are required to inform borrowers that they can revoke robo-dialing consent and that they can’t robo-dial people who don’t have a student debt. “If that’s maintained that will mean that the industry has to pay attention to who they’re calling and won’t be able to just call willy-nilly,” she said.