Back in 2012, Stephen Burd broke a story in the Washington Monthly about the predatory “repo man” tactics used by contractors working for the Department of Education to collect payments on college loans.

Gregory McNeil, 49, is living out his days at a veterans home in Grand Rapids, Michigan. His room is so cramped he can barely fit his twin bed, dresser, and the computer desk he had to sneak in because it was against regulations. His only income comes from the Social Security disability payments he began receiving last year after undergoing quadruple-bypass heart surgery. These payments go directly to the veterans home, which then gives him $100 a month for his expenses. McNeil fears that if he leaves the home, the government will seize a portion of his Social Security to pay off the federal student loan he defaulted on two decades ago. “This veterans home may become my financial prison,” he says. “And this is no way to live.”

McNeil’s fears are well grounded. For years, private collection companies acting under contract with the U.S. Department of Education have hounded him. The government garnisheed his wages for a time, and threatened to sue him. He says he always wanted to repay, but has never had the income he would need. Meanwhile, interest continues to accrue on his debt, and has already tripled the amount he owes.

Yeah, the idea of going after a veteran’s Social Security payments after he just underwent quadruple bypass heart surgery is NOT a good look for the Department of Education. But that’s what their contractors were doing.

In his story, Burd specifically singled out one company.

One of the most aggressive loan-collection firms is Pioneer Credit Recovery, a subsidiary of student loan giant Sallie Mae. Consumer Web sites are full of complaints about the company’s practices. Meanwhile, former Pioneer collectors recently told Bloomberg Businessweek that the company has a “boiler room” culture, where low-paid workers are richly rewarded for squeezing the most money they possibly can out of defaulted borrowers. Those who miss their targets are under constant threat of losing their jobs. “When you’re making eight bucks an hour, it’s all about the bonuses,” said a former Pioneer employee who worked at the collection agency from 2004 to 2007.

Yesterday, the Department of Education finally cut ties with these contractors.

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.

That’s a great first step. But you’ll want to read Stephen Burd’s whole article to hear about a more comprehensive approach that would solve this problem for the 7 million Americans who are currently affected.

One final note, the Consumer Financial Protection Bureau was created specifically to tackle these kinds of issues. Note their involvement in taking complaints, filing reports and investigating abusers. This is exactly why it is such an important component of the Dodd/Frank reforms.

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