Dive Brief:

• The U.S. Department of Education has opted for a draconian system of debt collection from defaulted student loan borrowers that ends up costing taxpayers more than a more humane approach, according to the National Consumer Law Center.
• The current collection system — which uses 22 private collection agencies — will pay out more than $1 billion in commissions to collectors in 2014 and $2 billion in 2016, the law center reports.
• The education department rewards collection agencies based on total money collected, creating fierce competition to win multi-million-dollar bonuses awarded to the top three collectors.

Dive Insight:

The law center reports that the volume of complaints against collection agencies has no bearing on how the education department evaluates those companies. The center recommends doing away with private collectors, and testing alternatives means working with borrowers in default — those with loans more than 270 days past due. Also recommended: Publicize information about debt collection performance, complaints, and costs; make it easier for borrowers to file complaints; and make rehabilitation options easier to access for borrowers in default.