DES MOINES, Iowa (AP) — An Iowa agency is making a new effort to recover millions of dollars in defaulted private student loans, some dating back to the 1990s.
The state College Student Aid Commission has entered into an agreement with the state Department of Revenue to recover more than $9.4 million in Iowa Partnership Loans, the Des Moines Register reported .
“I would be happy if we got a third of it back,” said Karen Misjak, the commission’s executive director. “Bad debt is bad debt.”
The Revenue Department will use several methods to collect the defaulted loans from almost 1,000 borrowers, including garnished wages and withheld state income tax refunds, according to the agreement. The Revenue Department will keep 28 percent of the funds collected.
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Lawmakers approved the Partnership loan program in 1992, when few low-cost student loan options were available.
The commission worked with the nonprofit Iowa Student Loan Liquidity Corp. to administer the loan program, each investing $500,000 in seed money.
The commission later purchased the private loans in default at a heavily discounted price from 1998 to 2006, spending more than $6.2 million in state money to purchase loans made to more than 1,900 borrowers that are valued at more than $16 million.
“Apparently the reasoning behind it was that we had more collection tools that we could utilize . and we would get a higher rate of return,” Misjak said.
The commission has since recouped the state’s original investment, but the balance of the outstanding loans must still be recovered, she said.
The commission worked on its own to collect money for about three years before hiring a collection agency. The agency was paid more than $900,000 to recover almost $4.6 million over a decade.
Information from: The Des Moines Register, http://www.desmoinesregister.com