This is exciting news for folks who may be behind on their student loans. President Obama has cut the commission that debt collectors get on student loans. Why does this matter?
Student loan debt collectors are some of the most aggressive debt collectors. Why? For two reasons. First, student loans are generally not dischareable in bankruptcy. So, the debt collectors don’t get worried when you say you are going to file for bankruptcy. It is not really a threat. Second, some debt collectors wrongly believe that they are not bound by the Fair Debt Collection Practices Act or the Rosenthal Act. So they get more aggressive with you.
This change is going to decrease the incentive debt collectors have to be aggressive. They will not make as much money so they will not be so cavalier. This should make it easier for consumers to work out a payment arrangement with a debt collector if they get behind.
If you realize you are going to be late on your student loans, do not bury your head in the sand. Talk to an attorney about what options you have. Even if bankruptcy is not an option, you may have other rights.