Now that the government is shut down, there is a great concern about how this affects collections of student loans, default or not. We first need to clarify that the shutdown only affects government agencies. Guarantee agencies like ECMC, Great Lakes, etc. are not affected at all. They are still more than happy to call and accept borrower payments. Same goes for student loan servicers and debt collectors. The real issue are those arms of collections that are directly part of the Department of Education.
To find out for myself, and you the reader, I first contacted ED’s Ombudsman. The phone was answered so I asked how the shut down affects them. I was told that calls will be answered, however, problems may not be dealt with until after the shut down resolves. Hhhhmmm…I guess it beats leaving a message on voice mail. I would say this is probably a half answer as it did not seem to be scripted. Still, it rings of truth – the problem is likely not going to be dealt with until the shut down is over – and that is a potential problem for someone with an issue.
Next I called Default Resolution Group, ED’s collection arm. To my surprise, not only did they answer my call, but I was also pleasantly surprised when told that the shutdown doesn’t affect them at all. I guess that makes sense – these people are charged with collecting, that is, getting money back for the tax base.
Based on these two calls, it appears the government shut down doesn’t affect student loan collections, which is good. My concerns were that payments would be sent but not processed. This is extremely important for people rehabilitating their loan out of default – there is a window for payments to be received and they must be made monthly (with exceptions). Imagine a scenario where a debt collector reviews an account and finds that no payment was received for rehabilitation. They call the borrower and make strong suggestions about failing to make the payment. Yet in truth, the borrower made the payment, but the payment hasn’t been processed because payments are made to ED directly (per direction of the debt collector – a very common scenario). It would seem this won’t happen so long as ED is open to process the payments. I would also breath a sigh of relief to know ED will be available to process consolidation applications, again to help people get out of default and avoid a wage garnishment. On the other hand, if ED isn’t processing consolidations, are they around to send out garnishment orders?
For now, it would seem borrowers are safe. Keep making payments for whatever plan you’re on. If you’re not on a plan, get on one (after you learn all options – educated decisions are very important here). If the shutdown lingers, we’ll see how long ED is around to answer calls, take payments, process consolidation applications, etc. As always, the best way to protect oneself is document everything. Take good notes when talking to debt collectors, ED, etc. Send payments with proof of delivery. And while you’re at it, contact your Congress person and let them know how you feel about the shutdown.