U.S. Secretary of Education Arne Duncan Credit:usnews.com

U.S. Secretary of Education Arne Duncan
Credit:usnews.com

The U.S. Department of Education, under fire for its lackluster oversight of student loan contractors, said Friday it will terminate its relationship with five debt collectors after accusing them of misleading distressed borrowers at “unacceptably high rates.”

The surprise announcement follows years of complaints about allegedly illegal debt-collection practices by Education Department contractors, the department’s seeming lack of interest in ensuring that borrowers are treated fairly, and the relative opacity of the entire operation.

The most prominent of the debt collectors, Pioneer Credit Recovery, is owned by Navient Corp., the student loan giant formerly known as Sallie Mae. Pioneer, under investigation by the Consumer Financial Protection Bureau, generated $127 million from the contract over the past two years, according to its annual report to investors on Friday. It has worked for the Education Department since 1997.

With the number of borrowers in default now more than 7 million as federal student debt surpasses $1.1 trillion, the contracts have become among the most lucrative […]

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