Virginia Attorney General Miyares announces plan to cut collection fees on overdue state student debt in half

NerdWallet Student Loan Cost
Posted at 5:45 PM, Jan 30, 2022
and last updated 2022-01-30 17:45:16-05

RICHMOND, Va. - Virginia Attorney General Jason Miyares announced last week an internal policy that will immediately provide relief to working families and students struggling with student debt.

The Office of the Attorney General is statutorily required to perform debt collection legal services for certain Virginia state colleges and universities on overdue student accounts. Many times, the collection fees accessed on overdue accounts significantly increase the amount of money owed by students by as much as 30%, and Miyares' office says he "knows that's wrong."

“As someone who worked to put themself through college and still has their own student loans, I understand the strain student loans can put on working families. By working to reduce the attorney collection fee from 30% to 15% on accounts deemed delinquent by the respective universities, we are making immediate, internal procedural improvements that will help Virginians,” said Miyares.

The new policy will limit the attorney’s fee assessed on student accounts to 15% on any new claim that is referred by a public university or college for collection of a delinquent student account to the Office of the Attorney General, in cases where the OAG has the authority to do so. This is lower than the nearly 18% fee charged by the federal government for defaulted student loans.

In other cases, including where the college or university has established its own policy requiring a higher attorney’s or collections fee, the Office of the Attorney General will encourage these institutions to compromise their fee down to 15%, and in exchange, the OAG will reduce the contingency fee it charges for its legal services to 15%.

In the future, the Office of the Attorney General says it will encourage universities to amend their collection fee policies to match the 15% rate.

The office will also offer more generous payment plan options to help students avoid a legal suit or entry of judgment against them.

Virginia is home to some of the best public universities in country. This policy change helps students make public education more affordable and accessible to all Virginians.

Related: Student debt crisis hits Black borrowers the hardest

In addition to this immediate policy change, Miyares is inviting students who have incurred delinquent accounts at a public college or university and who have had their accounts referred to the OAG for collection, to reach out to the OAG to discuss their situation and for consideration of whether additional relief is appropriate under the circumstances.

For more context about this issue, see VPM'sDreams Deferred Series.