The Attorney General of New York is seeking ways to overhaul how unpaid student loans are collected, especially those incurred by individuals attending State University of New York schools, because a little-known regulation allows the AG to file suit in State Supreme Court in Albany, N.Y., regardless of where the individual with the unpaid student loan resides. This has resulted in 16,000 SUNY students who have been taken to court in the past eight years, many of which who had default judgments entered against them because they were unable to make it to their court date.
Letitia James, the Attorney General of New York last week sent a letter to state lawmakers with an offer to work together on “overhauling the system,” according to a published media report. One possible alternative would be to give the AG’s office “more flexibility” in negotiating settlements with individuals who have unpaid student loans.
Five states — New York, Virginia, Ohio, Pennsylvania, and Louisiana — allow the attorneys general in those states to collect on unpaid student loans owed to public colleges and universities. The situation in Ohio was recently profiled in a study, which inferred that collection agencies were awarded contracts based on patronage and donations.
Medical debts and student loans are exempt from a state law in New York requiring collection lawsuits be filed in the counties in which the individuals who incurred the debt reside. A bill has been introduced in the state legislature to change the exemption for student loan debts.
Based on inquiries from The New York Times, the New York AG’s office said it will change its practice and file collection lawsuits in different counties in the future.
