Today, Education and Labor Committee Republican Leader Virginia Foxx (R-NC) and Rep. Julia Letlow (R-LA) sent a letter to the Department of Education’s (Department) Inspector General Sandra Bruce asking her to investigate the Department’s decision to terminate its contracts with all private collection agencies (PCAs).
The letter notes the action could have significant consequences for the approximately 7 million defaulted borrowers that rely on PCAs to bring them into good standing, and questions whether the Department will have “the necessary expertise, security clearance, and licensing required to complete collections work” as they oversee returning over 40 million federal student loan borrowers back into repayment February 1.
In the letter, the Members write: “While Chief Operating Officer Mr. Richard Cordray has stated that this action ‘should have minimal impact on borrowers,’ we are concerned this will not be the case. Of the five business process operations (BPO) vendors who are expected to perform collections activities for the Department going forward, only one has collection experience and is licensed to undergo collection activities in the states in which they work. Moreover, these contractors are facing labor shortages due to the pandemic and will now be required to undertake new responsibilities with fewer resources.”
The Members continue: “There are approximately 7 million defaulted borrowers with federal student loans who will see payments and interest accrual resume despite not having made payments in nearly two years due to the repayment pause. As such, it is particularly troubling that the Department has taken this extraordinary action without providing the necessary information and assurance that it is prepared to address the array of unintended consequences resulting from the contract termination.”
Full text of the letter to Inspector General Bruce is available here.