What happens when your student loans go into default? If you’ve ever wondered what really happens when you default on your student loans, the answer is not so simple.
College grads are carrying anywhere from hundreds to hundreds of thousands of dollars in student loan debt.
While it’s not good to ignore your student loan payments, there may be some circumstances where you can’t make payments on time or end up missing payments altogether.
This will most likely result in a serious situation called student loan default.
And if your student loans go into default, your loans will be transferred from your student loan servicer to a third-party debt collection company. And this can be strange to many borrowers. You might have spent years dealing with a company like Fedloan or Nelnet, then suddenly you're receiving a call from a company named Educational Credit Management and you're very confused. Is it a scam? What's going on?
Here's what you need to know about dealing with student loan debt collectors, including the full list of all debt collection agencies that work on behalf of the Department of Education so that you can be sure you're not going to be scammed.
If you're not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
Important Note For Covid-19: Collection activity on student loans is set to resume in mid-2023. If you've been in a rehabilitation program, your non-payments during Covid-19 count and you should resume in good standing. However, if you've been in default, you need to be prepared. Learn about the Fresh Start Program here.
Repercussions Of Defaulting On Your Student Loan Debt
Student loan default is one of the worst financial actions that can happen to you. You'll be dealing with the following.
If you do find yourself in default on your student loans, you'll need to communicate with the collections agency that has been assigned to your debt. You'll have a couple of options, including student loan rehabilitation, setting up a repayment plan with them, or potentially even settling the debt.
Federal vs. Private vs. Privately-Held Federal Loans
Depending on your loan type, you'll encounter various debt collectors. For Federal loans, the Department of Education has stopped using private debt collectors and now simply uses it's existing loan servicing companies. You can see your loan information here: https://myeddebt.ed.gov/
For private and privately-held Federal loans (like FFEL or Perkins), you may encounter one of the agencies below.
There are over 20 different student loan collections agencies, many with names you're not going to be familiar with. If one of them reaches out to you, you need to take it serious.
Below is a list of common student loan collection agencies along with their contact information if you need to reach out to them.
Debt Collection Laws Protect You
Remember, these companies are third party debt collectors, and there are laws that limit what they can and can't do. The Fair Debt Collection Practices Act (FDCPA) is a federal law that provides limitations on what debt collectors can do when collecting certain types of debt. The federal Fair Credit Reporting Act covers how debt collection is reported in credit reports. In addition, there are state laws that provide protections.
These companies may NOT:
- Contact you before 8am or after 9pm. Also if a debt collector knows that you're not allowed to receive the debt collector’s communications at work, then the debt collector is not allowed to contact you there.
- The debt collector may not harass you or anyone else in regards to the debt.
- If you tell the debt collector to stop contacting you in writing, they must stop contacting you except to take legally allowed actions against you, such as filing a lawsuit (if this happens, you need to get a student loan lawyer ASAP).
If you are contacted by a debt collector for your student loan debt, they are required to tell you the following information about your debt:
- The name of the creditor (this will be your student loan servicer and should sound familiar)
- The amount owed (remember, this amount may be much larger than your original debt amount due to accrued interest and fees from being in default)
- That you can dispute the debt
- That you can request the name of the original creditor, if different than the current one
Also, certain states have also increased borrower rights. For example, California recently passed the California Student Loan Borrower Bill of Rights.
Student Loan Debt Collection Agencies
Here is the full current list of student loan debt collection agencies. These companies do change from time to time, and we strive to keep this information as current as possible.
For federal student loans, the U.S. Department of Education is directly managing most collection activity through their Default Management Resolution Group. However, if you have other student loans, these agencies may contact you.
1. Account Control Technology, Inc
P.O. Box 8012
Canoga Park, CA 91309
(888) 830-7770
2. Action Financial Services LLC.
2055 Cardinal Ave
Medford, Oregon 97504
888-253-4239
3. American Student Assistance Corp
4. Central Research, Inc.
122 N. Bloomington, Suite I
Lowell, AR 72745
(479) 419-5456
www.central-research.com
5. Coast Professional, Inc.
P.O. Box 2876
West Monroe, LA 71294
(888) 815-2843
6. Collection Technology, Inc.
P.O. Box 2300
Rancho Cucamonga, CA 91729
(800) 743-4284
7. Collecto, Inc. dba Collection Company of America
PO Box 329
Norwell, MA 02061
(877) 395-5997
9. Credit Adjustments
330 Florence St.
Defiance, OH 43512
(800) 544-6359
www.credit-adjustments.com
10. Debt Management and Collections System
PO Box 5609
Greenville, TX 75403-5609
National Payment Center
PO Box 105028
Atlanta, GA 30348-5028
(800) 621-3115
11. Delta Management Associates, Inc.
P.O. Box 9242
Chelsea, MA 02150-9242
(855) 282-5983
12. ECSI Federal Perkins Servicer
100 Global View Drive Suite 800
Warrendale, PA 15086
(888) 549-3274
13. Educational Credit Management CORP
PO Box 16408
St. Paul, MN 55116-0408
(855) 810-4922
14. Enterprise Recovery Systems, Inc. now Alltran Education Inc.
16. Florida Department of Education OSFA
Local Metro Area
Tallahassee, Fl
850-410-5200
17. FMS Investment Corp
19. General Revenue Services (USA Funds)
4660 Duke Drive
Suite 300
Mason, OH 45040-8466
Phone: (800) 234-1472
20. Immediate Credit Recovery Inc.
6 Neptune Road
Suite 110
Poughkeepsie, New York 12601
(800) 234-4271
(855) 889-3111
24. New York Higher Education Loan Program (NYHELP)
99 Washington Avenue
Albany, New York 12255
(800) 888-0741
25. Pennsylvania Higher Education Assistance Agency
Pennsylvania State Grant Program
P.O. Box 8157
Harrisburg, PA 17105-8157
(800) 692-7392
26. Pioneer Credit Recovery, Inc.
26 Edward St.
Arcade, NY 14009
(585) 492-1234
27. Progressive Financial
28. The CBE Group, Inc.
30. West Asset Management, Inc.
171 Mercy Rd., Omaha, NE 68106
(402) 391-5285
(800) 397-7243
Avoiding Student Loan Default
Of course, the easiest way to steer clear of having to deal with any of these companies is to avoid student loan default altogether. Make sure you understand what type of loans you have and commit to making your payments on time.
Also, seek out student loan debt relief options like refinancing, deferment or forbearance, and even student loan forgiveness. Student loan forgiveness is not a quick fix and you'll still have to pay on your student loans but it's wise to see if you qualify if you hold federal student loans.
Final Thoughts
Navigating student loan collections can be challenging, especially if you haven't looked at your student loans in a long time.
Consider getting the help of an attorney who specializes in student loan debt so that you can find the answers you need before you commit to something that may not help you financially.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Editor: Clint Proctor