ED recalls federal student loans from private debt collectors

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With the return to repayment of federal student loans on February 1, 2022 quickly approaching, the Department of Education’s Office of Federal Student Aid (FSA) recently notified the private collection agencies (PCAs) under contract with FSA to collect Direct Loans that it would begin the process of recalling approximately 5.1 million borrower accounts and winding down the PCAs’ contracts.  FSA expects to transition default counseling, debt collection, and related work to its Business Process Operations vendors, some of which (or their subcontractors) are among the PCAs it has notified of its recall plans.

In the short-term, Maximus, which operates the FSA’s Debt Management and Collection System, will continue to provide borrower assistance through the Default Resolution Group contact center.  FSA has indicated that it plans to send an email to borrowers regarding the change and that it will update StudentAid.gov and other information once the PCA contracts officially end.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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