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Around the world many institutions use factoring. https://en.wikipedia.org/wiki/Factoring_(finance) https://en.wikipedia.org/wiki/Factoring_(finance) This conv

Around the world many institutions use factoring. https://en.wikipedia.org/wiki/Factoring_(finance) https://en.wikipedia.org/wiki/Factoring_(finance) This converts receivables into cash by selling them a third party at a discount. This doesn't prevent the educational institutions from getting their cash. Not sure how it works in the US.

jff 11y ago
The Department of Education sold my loan to a private company within a year or so of graduation. No rate change or anything, I just started logging in on a different web site to pay. Same thing with my wife and with many people I know.
- tropo 11y ago
  This is terrifying. Did you get registered mail at least? Did the old web site tell you where to go? If you don't believe the notice you are given, you fail to pay. If you do believe whatever notice you get, you are vulnerable to fraud.
  - suninwinter 11y ago
    My mortgage has been sold at least 4 times since I got it about 3 years ago. Each time, I get a letter from the old company and the new company. Hopefully, that's what happened here.
- hdctambien 11y ago
  My understanding is that the Department of Education was never servicing your load, they contract that out from the beginning. If your load gets transferred. It happens because one of their contractors "goes away" and all the loans that contractor was servicing need to be transferred to another contractor. I wouldn't buzz in on Jeopardy with that answer, though.
mbesto 11y ago
That doesn't make the problem any less worrisome. Factoring assumes that the company paying for an invoice will have the means to pay off the service rendered eventually (on a net 30/60/90 basis usually). Factoring helps to free up cashflow for the receiver, not necessarily guarantee that a remittance be satisfied. If the core value were the latter, the premiums go up so high that it's not really financially viable for most businesses to use factoring against their receivables. The problem with student debt is default, not cash flow. Further, the problem isn't the educational institution getting paid, it's the lender (in this case the government, and thus the taxpayers) who lent out money to people without any historical context of their ability to pay off a loan. Hence the quote: “On what planet does a financing vehicle with those kinds of terms and those kinds of performance metrics make sense,” he said.

jff 11y ago

The Department of Education sold my loan to a private company within a year or so of graduation. No rate change or anything, I just started logging in on a different web site to pay. Same thing with my wife and with many people I know.

tropo 11y ago
This is terrifying. Did you get registered mail at least? Did the old web site tell you where to go? If you don't believe the notice you are given, you fail to pay. If you do believe whatever notice you get, you are vulnerable to fraud.
- suninwinter 11y ago
  My mortgage has been sold at least 4 times since I got it about 3 years ago. Each time, I get a letter from the old company and the new company. Hopefully, that's what happened here.
hdctambien 11y ago
My understanding is that the Department of Education was never servicing your load, they contract that out from the beginning. If your load gets transferred. It happens because one of their contractors "goes away" and all the loans that contractor was servicing need to be transferred to another contractor. I wouldn't buzz in on Jeopardy with that answer, though.

mbesto 11y ago

That doesn't make the problem any less worrisome. Factoring assumes that the company paying for an invoice will have the means to pay off the service rendered eventually (on a net 30/60/90 basis usually). Factoring helps to free up cashflow for the receiver, not necessarily guarantee that a remittance be satisfied. If the core value were the latter, the premiums go up so high that it's not really financially viable for most businesses to use factoring against their receivables. The problem with student debt is default, not cash flow. Further, the problem isn't the educational institution getting paid, it's the lender (in this case the government, and thus the taxpayers) who lent out money to people without any historical context of their ability to pay off a loan. Hence the quote: “On what planet does a financing vehicle with those kinds of terms and those kinds of performance metrics make sense,” he said.