A year ago, the U.S. Department of Education announced it would be severing ties with five private collection agencies. Currently, all of them are doing work for the government agency.
Coast Professional Inc. and National Recoveries Inc. were rehired by the Education Department. Enterprise Recovery Systems, West Asset Management and Pioneer Credit Recovery haven't stopped pursuing delinquent federal student loans since the announcement that their contracts would wind down, according to Inside Higher Ed.
Coast Professional and National Recoveries are working on new portfolios of defaulted student loans sent by the Education Department, which apparently started working with the two companies because of corrective action they’ve taken, according to Inside Higher Ed. The portfolios only include loans in default or of borrowers subject to wage garnishment. The Education Department a year ago revealed plans to terminate the five contracts after a review of 22 private collection agency contracts. The review sought to ensure that the collection agencies were complying with contract terms, including assuring that the agencies would not engage in unfair or deceptive practices and would comply with relevant federal and state laws. Officials stated, among several issues, that the agencies had provided inaccurate information about the benefits of a loan rehabilitation program - an option that can create benefits to defaulted borrowers after they have made nine on-time payments in a period of 10 months. A few days after the Education Department's announcement, Pioneer Credit said it would need to cut 400 jobs as a result of losing the contract. Coast Professional last March filed a complaint with the U.S. Court of Federal Claims that accused the Education Department of acting arbitrarily and not following proper procedures. National Recoveries and Enterprise Recovery Systems Inc. also filed complaints. In April 2015, a federal court judge entered a sealed opinion dismissing the complaints, citing a lack of jurisdiction. Enterprise Recovery appealed the dismissal and the case is pending before the U.S. Court of Appeals for the Federal Circuit.