Student loan returns to haunt aging boomer

The Bakersfield Californian
August 29, 2012

The calls began about four years ago. My client, who I will call Bob, had just come home from work and his telephone was ringing. The caller said he represented a debt collection company hired to recover Bob’s unpaid student loan.

Bob, who is now 65, graduated from Cal Poly, SLO, in 1970. He worked his way through college, avoiding taking out student loans with one exception. In 1969, the summer before he graduated, he took out a $500 loan to pay for a trip abroad to participate in a research project.

Bob’s now-deceased parents paid off the loan as a graduation present. He never gave the loan another thought. He kept no records of the loan or its repayment.

The debt collector warned Bob he would face grave consequences if he did not pay the $500 he claimed Bob still owed. He warned non-payment would jeopardize government benefits, including social security.

Bob and his wife, Joan, brushed off the frequent and increasingly abusive calls from the man. After several months, the calls suddenly stopped.

But Bob soon learned that his nightmare had not ended. Another man from another collection agency started calling. And worse yet, his one student loan had jumped to two. The unpaid amount was several thousands of dollars, not just the $500 he remembered borrowing as a college kid.

Bob turned to me for advice. Perhaps he actually did owe the money; or maybe the calls were part of a common scam. Certainly not paying off student loans has consequences.

The federal Department of Education estimates two-thirds of students who earn a bachelor’s degree use some type of loan to finance their educations, with an average loan amount of roughly $23,000.

Barry James Dykes, author of “The Pirates of Manhattan II: Highway to Serfdom,” predicts student loans, in excess of $1 trillion, will likely be one of the country’s next financial infernos.

And student loans just won’t go away. Even a bankruptcy will not discharge them. Tax refunds and salaries can be attached to collect them.

So today’s students should take on debt cautiously and sparingly; pay off their debts; and keep careful records – forever.

But Bob was not helplessly at the mercy of these abusive collectors. Some tips I offered:

  • Insist on receiving written documentation of any alleged debt.
  • Write a “cease” letter to the collector. Demand that the harassment cease immediately. Keep a copy. Send the letter by certified mail and request a return receipt.
  • File a complaint with the Federal Trade Commission. In 1977, Congress passed the Fair Debt Collections Practice Act, which regulates the behavior of debt collectors. Guidelines can be found on the FTC website at www.ftc.gov
  • File a complaint with the newly created federal Consumer Financial Protection Bureau at www.consumerfinance.gov
  • File a complaint with the California Attorney General’s office – www.oag.ca.gov

Bob sent his “cease” letter and filed complaints with federal and state agencies. The collector’s calls have stopped – at least for the moment.