ED Approves 26 Collection Agencies to Bid on Student Loan Collection Contract

The U.S. Department of Education (ED) announced last week that it has asked 26 collection agencies to provide quotes for collection services on its new student loan collection contract expected to be awarded in September. The list is comprised mainly of holdovers from the current contract.

Through its Federal Student Aid unit (FSA) – the division that administers the multi-billion dollar collection contract – ED said that it had contacted the 26 collection agencies it chose to accept bids from last week. Agencies wishing to bid on the contract have until 4pm Eastern on June 26 to do so.

The new student loan contract will formally run through March 2011, but will have options for extensions of up to two years. The current contract expires in March 2009, but some agencies will be asked to remain on the contract to ease the ramp-up time of new contractors (“ED to Extend Current Collection Contract for Only a Few,” April 21).

ED decided to ask all but one of the current 17 collection agencies on the contract to re-bid for the new one. The one that was excluded, Toronto-based Collect Corp., has consistently been at the bottom of rankings for the contract and is the only agency that has an overall recovery rate of less than 4 percent.

The collection agencies on the current contract have collected $3.66 billion for ED over the course of 38 months.

FSA divides the collection contract into two parts: the unrestricted category for larger businesses and a small business set aside for agencies with less than $6.5 million in annual revenues.

Of the 17 unrestricted invitees, only two new names were added to the list – Salem, N.H.-based Windham Professionals and Westchester, Ill.-based Enterprise Recovery Systems. There were also four current small business collectors that were elevated to the unrestricted category: Account Control Technology, ConServe, Financial Management Systems, and Premiere Credit.

In contrast to the unrestricted category, the small business invitation list is comprised almost exclusively of new names. The only current contractor to remain eligible for the small business set aside is Collection Technology, Inc., and it was invited to bid.

In January, Richard Galloway, contracting officer’s representative for ED, told insideARM that there would be turnover on the contract “especially on the small business side,” ("Small Business Slots on ED Contract Up For Grabs," Jan. 9).

The collection agencies asked to bid on the new contract are:

Unrestricted category