The Default Management Group of the Department of Education collects on student loans which were given under Title IV of the Higher Education Act of 1965. Stafford Loans were granted by banks (and/or other lending institutions) and guaranteed by the U.S. Government. Similarly, Supplemental Loans for Students (SLS) were also made by banks to undergraduate, graduate and professional students. These loans, as well as Perkins loans, Direct Loans and Health Professions Loans can be consolidated in the Federal Loan Consolidation program. Parent Plus loans used to be called Parental Loans for Undergraduate Students. Beginning in 2005, PLUS loans were also made to graduate and professional students.
Perkins loans used to be called National Defense/Direct Student Loans (NDSL). Perkins loans are held by education institutions but can be transferred to the Department of Education for collection.
Private collection agencies are called PCA’s. Private Collection Agencies are bound by the Fair Debt Collection Practices Act. Collection activities and collectors with the Department of Education are not bound by the Fair Debt Collection Practices Act. When a Private Collection Agency is tasked with collecting on federal student loans, a clause excludes the Department of Education from any liability.
The Department of Education can release your loan records for the purpose of servicing and/or collecting on the debt under the Privacy Act of 1974. If you want your attorney to have access to your loan records, you will need to provide 3rd party authorization to the Department of Education.
Defaulted loans can be reported for 7 years on your credit report for Federal Family Educational Loans (FFELs). 20 USC Section 1080a(f)(1). Defaulted Direct Loans will also be reported for up to seven years because Direct Loans should be treated the same as FFEL Loans under 20 USC Section 1087e(a)(1).
Default information on a Perkins loan will likely be reported until the loan has been completely paid in full under 20 USC Section 1087cc(c)(3).
Default for FFEL loans will likely be reported when the guaranty agency lays claim to the loan under 20 USC Section 1080a(f)(1). Default for Direct Loans will likely be reported as of the date the loan has been transferred to the Default Resolution Group.
If you rehabilitate or begin to repay and then default on the loan again, you will likely have set a new default date for credit reporting purposes for seven years under 20 USC 1080a(f)(3).