Loan Monitor Is Accused Of Ruthless Tactics On Student Debt
"Stacy Jorgensen fought her way through pancreatic cancer. But her struggle was just beginning. Before she became ill, Ms. Jorgensen took out $43,000 in student loans. As her payments piled up along with medical bills, she took the unusual step of filing for bankruptcy, requiring legal proof of 'undue hardship,'" The New York Times reports. "The agency charged with monitoring such bankruptcy declarations, a nonprofit with an exclusive government agreement, argued that Ms. Jorgensen did not qualify and should pay in full, dismissing her concerns about the cancer’s return. ... Congress, faced with troubling default rates in the past, has made it especially hard for borrowers to get bankruptcy relief for student loans, and so only some hundreds try every year. And while there has been attention to aggressive student debt collectors hired by the federal government, the organization pursuing Ms. Jorgensen does something else: it brings legal challenges to those few who are desperate enough to seek bankruptcy relief. That organization is the Educational Credit Management Corporation, which, since its founding in Minnesota nearly two decades ago, has been the main private entity hired by the Department of Education to fight student debtors who file for bankruptcy on federal loans. Founded in 1994, just after the largest agency backstopping federal student loans collapsed, Educational Credit is now facing concerns that its tactics have grown ruthless. A review of hundreds of pages of court documents as well as interviews with consumer advocates, experts and bankruptcy lawyers suggest that Educational Credit’s pursuit of student borrowers has veered more than occasionally into dubious terrain. A law professor and critic of Educational Credit, Rafael Pardo of Emory University, estimates that the agency oversteps in dozens of cases per year. ... Representative Steve Cohen, a Tennessee Democrat who has introduced a bill to limit predatory tactics, said, 'The government should hold its agents to the highest standards, and I don’t know that we’ve been doing that.'"
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