Bloomberg: Obama Relies on Debt Collectors Profiting From Student Loan Woe

This article was published today, and discusses the cozy relationship that the Department of Education has with private debt-collection companies who are putting more pressure on borrowers to repay their student loans.

Here are some highlights:

• With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. 
• Education Department contracts -- featuring commissions of as much as 20 percent of recoveries -- encourage collectors to insist on high payments
• Debt-collection companies helped the Education Department recover $11.3 billion in defaulted loans during the year ended Sept. 30
• The debt collectors made out well, too. Based on a review of government contracts and Education Department data, the private companies -- working directly for the government and through state agencies -- received commissions of about $1 billion in the year through September

 And we all know that politicians continue to ignore the student lending crisis. And it just keeps getting worse.

That said, many are heartened by the U.S. Consumer Financial Protection Bureau's focus on student loans. But it remains to be seen what sort of influence this new bureau will wield, especially when it comes to student loans and borrowers' issues with delinquency and default.

The article also mentioned the possibility of helping out defaulted borrowers! Here's that tidbit:

The Education Department this week will hold meetings with industry, government and consumer representatives to consider requiring that debt collectors automatically offer payments based on income to defaulted borrowers who qualify. If approved, the rules could take effect in July 2013.

 Of course, they are merely discussing the option this week. Plus, what will the requirements be, i.e., how will they determine if a defaulted borrower qualifies for the income based repayment? Sadly, the Education Department doesn't do an adequate job of reaching out to borrowers.