The Louisiana Office of Student Financial Assistance (LOSFA) today announced the recovery of nearly $28 million during the federal fiscal year ending October 31,2000, from borrowers who defaulted on student loans.
"It is somewhat ironic," LOSFA Executive Director Jack L. Guinn said, "that this news comes so closely on the heels of recent media reports criticizing many state agencies for failure to collect debts owed to Louisiana. However, this announcement is clear evidence that LOSFA is not one of those agencies."
LOSFA is the state agency designated by the U.S. Department of Education as the guarantor for student loans made within Louisiana under the Federal Family Education Loan Program (FFELP).,
Aggressive collection efforts within the agency have lifted LOSFA's cumulative recovery rate from a mere 30.6 percent in 1991 to 62.5 percent in FFY 1999-2000. "This rate, which is calculated by dividing the total dollar amount defaulted into the total amount collected, is a difficult figure to move-- given its cumulative nature," Guinn continued. "Over the past ten years, however, LOSFA has consistently increased its collection rate and has secured a spot as a top recovery unit among other student loan guarantors nationwide."
Over the past year, LOSFA has been successful in collecting approximately $15.6 million in defaulted student loans for lending institutions whose own prior collection efforts had failed. It was during this same period that LOSFA's collections section helped recoup defaulted loans from borrowers totaling nearly $28 million. Those numbers include some loans that stretch back nearly four decades, back to 1964. Throughout its history LOSFA has guaranteed more than $2 billion in FFELP funding for Louisiana students.
"Federal student loans have no statute of limitations," Byron Henderson, LOSFA collections administrator, said. "They never go away, they just continue to grow."
A wide array of collection tools is available to LOSFA, which aid in the agency's recovery efforts. Henderson added that many borrowers falsely presume they can escape accountability for the defaulted loans and hide from their debts, but eventually one of the collection methods will catch up with them. Often this comes years after the loan default and brings with it years of accumulated interest.
Among the tools LOSFA has at its disposal for collection efforts is the federal law that enables administrative garnishment of a defaulted borrower's wages. This expedited process simply requires that LOSFA inform the borrower of the impending action. If satisfactory repayment arrangements do not result from this communication, LOSFA may then instruct the borrower's employer to begin garnishing wages.
Other means, including seizure of state and federal income tax returns and the withholding of both academic transcripts and licenses and certificates to practice a particular profession, are often utilized by the agency. These highly effective collection methods were instrumental in the attainment of LOSFA's FFY 1999-2000 in-house collection total of $10.5 million. Assistance from a number of outside collectors, including the state Attorney General's Office, contributed another $5 million in collections. The remainder of the annual sum of $28 million was collected through federal income tax offsets, rehabilitations and consolidations of the defaulted loans.
"It is a shame some of these defaulted borrowers wait so long to repay their loans," Henderson said. "There are many ways we can help them to minimize the consequences of having defaulted on their loan. If they just call us, we can even show them how to get their loans out of default and clean up their credit report."
Defaulted borrowers who wish to contact LOSFA for information about how to improve their situation should call (800) 256-6882.