04/12/2012 08:20 am ET

Debt-Collection Companies Help Washington Recover Billions

With $67 billion worth of student loans in default in the U.S., the 23 private debt-collection companies under contract with the Department of Education are putting the squeeze on borrowers. Private debt collectors, working directly for the DOE or state agencies, raked in about $1 billion in commissions last year. Now these companies are facing growing complaints that they’re violating federal laws by insisting on stiff payment plans, even when borrowers’ incomes make them eligible for leniency. Last year the DOE received 1,406 complaints about its hired debt collectors, up 41 percent from 2010.

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