Each year, millions of college students rack up student loans that won’t come due until they leave school. But even with financial aid, some students have trouble keeping up with the soaring costs of tuition, and once that debt ends up in the hands of a collection agency, the amount can mushroom out of control while the student is still in school. 

Fifteen states have statutes that require public colleges and universities to send delinquent student accounts to third-party debt collectors, who can then tack on as much as 30% in fees for themselves.

In short, this means that a student who lacked the financial means to pay their full tuition now faces an even larger debt. And if they drop out to get a full-time job to stop these bills from piling up, they may not be able to earn as much as they would have with a degree.

A Shocking Addition

The Washington Post talked to students in Virginia — where delinquent student debts of more than $3,000 are required to be sent to collections — and found some who were unexpectedly slammed with collections fees that added hundreds, sometimes thousands, of dollars to their debt.

One Virginia student tells the Post that she had been working throughout the spring semester to pay down her tuition bill at George Mason University.

When the semester ended she still owed about $3,000, which she planned to pay off this summer by working at a salon.

However, she says she was surprised to recently find out that the debt had been transferred from the school to a debt collector, who had added a 30% fee — about $1,000 — to the bill.

“The fact that they charged me as a student who has been paying throughout the semester this 30 percent fee is disgusting,” the woman tells the Post.

Why Use Debt Collectors?

Most public colleges have bursars offices that are fully equipped to deal with all the billing and payment processing associated with their students’ tuition, so why are these states forcing schools to farm out debt collection to actively enrolled students?

Some industry groups claim that schools don’t have the resources or the time to collect overdue tuition on their own, so debt collectors are their best option in recovering funds. They also contend that many of the students who have their accounts transferred may have ignored the colleges’ attempts to collect.

“Schools aren’t eager to send student accounts to collections… but they have limited staff who can’t keep working on the same accounts. It’s not cost efficient,” Anne C. Gross, vice president of regulatory affairs at the National Association of College and University Business Officers, tells the Post, noting that even without a state statute many colleges send outstanding tuition accounts to collectors.

Additionally, transferring the debt to a private collector might be appealing for colleges because it doesn’t actually cost them anything.

Instead, the often cash-strapped students are the ones paying. If a collector receives an account where a student still owes $1,000 in tuition, the agency can add 30% or $300 fee to the tab. The $1,000 balance goes to the college, while the collector keeps the $300 fee, the Post notes.

“It just makes it that much harder, take that much longer, to pay back what they owe,” Adam Minsky, an attorney specializing in student loan law, tells the Post.

Falling Behind

While the George Mason student tells the Post that she believes she would have been able to resolve her overdue account with the school by the end of summer, the added collection fee is making it more difficult.

“I’m so overwhelmed. I just finished paying the collection fee. School starts in less than a month and I still have to come up with the rest,” she said.

To make matters worse, she can’t enroll in fall classes until the debt is paid. At this point, some of the classes she needs to finish her degree are already full.

A rep for George Mason tells the Post that the school offers multiple payment plans that include no interest for certain students. The student says she looked into those options, but couldn’t afford the three installment payments.

The school rep said that the university “can’t allow students to create their own payment plans.”

“We are bound by state law and have an obligation to be responsible stewards of the taxpayers’ money.”

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