Hundreds of thousands of borrowers who are behind on their federal student loans may be the target of some unwanted -- and expensive -- attention: A provision in President Obama's deficit reduction plan would allow debt collectors to call the cell phones of people who are late on government loans or on loans with federal guarantees. Currently, collectors can only call home phones.

The administration views the measure as a necessary tool to collect on personal debts as greater numbers of Americans eliminate their land lines. Technically, the provision would also apply to people who are behind on their taxes or on mortgages insured by the Federal Housing Administration. But the Internal Revenue Service doesn't contract with private firms to collect delinquent taxes, and mortgage lenders aren't likely to hound borrowers by cell phone when they have the threat of foreclosure to compel payment, experts say.

In practice, "the main target will probably be student-loan debtors," says Margot Saunders, at counsel with the National Consumer Law Center. "Right now, the country is facing tremendous unpaid debt, not because we have a lot of deadbeats, but because a lot of people are out of work and can't repay the debt."

An estimated $50 billion in federal education debt is in default, says Mark Kantrowitz, founder of finaid.org, a student loan informational website. "The fear is collection agencies will use this [provision] to harass students," he says. In 2010, consumers lodged more than 144,000 complaints about debt collection practices with the Federal Trade Commission, making it the top consumer complaint after identity theft.

In recent years, student loan defaults have risen sharply, according to data released earlier this month by the Department of Education. Some 320,000 borrowers who entered repayment in 2009 had defaulted by the end of 2010, or about 9% of that group overall.

Students who attended for-profit colleges had more than three times the rate of default -- 15% versus 4.6% of students attending nonprofit schools. One reason: Students at for-profit schools are more likely to borrow: 92% did so in the 2007-2008 school year, the most recent data available, versus 27% of students at public colleges and 60% of students at private, nonprofit colleges.

"There are a whole slew of problems with students loans to vocational schools," says Saunders. "They are known to provide very high-ratio loans. The student doesn't pay much up front, and then there are real problems with the product. The vocational schooling doesn't train students for what they need, they don't help them find jobs, and [the students] are left owing huge amounts."

Moreover, it's those younger, jobless or underemployed people who are most likely to rely solely on a cell phone, and chose a pay-as-you-go phone, which can cost up to 25 cents a minute for a basic plan, says Howard Dvorkin, CPA and founder of Consolidated Credit, a debt management firm. "Collectors may call three to five times a day to get someone on the phone, so the cell phone bills are going to go up," he says. "It's a money grab that the administration is going for -- the government needs the money and a tremendous amount is owed, certainly for student loans."

Even if the provision is adopted, borrowers will be able to use tactics in the Fair Debt Collection Practices Act to protect themselves. Debt collectors can't contact you before 8 a.m. or after 9 p.m. unless you agree to it. Most people carry their cell phones to work, and debt collectors can't contact you there if they are told, orally or in writing, that you are not allowed to receive calls. Finally, collectors must stop contacting you if you notify them in writing.

"Allowing an abusive debt collection mechanism is not going to increase payment of debt, it's just going to increase the suffering of debtor," argues Saunders. "It's quite different than calling a home phone."

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Wendy Blackwidow

Lets see. Thousands upon thousands of people have been absolved of their debt after making decision to buy houses they could never really afford. What about absolving student loan debts that hard working students took on when they were brain washed by parents and colleges into thinking that an expensive education was the key to success for obtaining high paying jobs with high salaries. All lies. I think students who completed their education and are now overworked and underpaid becuase the baby boom generation isn't retiring, have more of valid reason to be absolved of their student loan debts than those who bought houses they knew they could never afford to begin with.

October 25 2011 at 11:21 PM Report abuse rate up rate down Reply
KILO

to lilspicey: My husband and I are both on disability checks...we too struggle with our bills and yes, how unkind for the continuous calls of threats and intimidation. I do not answer my home phone, the answer machine does. i do not know a number on my cell, I do not answer. Having congestive heart problems and time to change out the pacemaker, I do not need added stress. My husband has been clean from lymphoma for over 6 years, medical bills show up all the time on our credit report...I would rather be healthy w energy and tackle the world to make it a better place. But as Marilyn Monroe once said: "Everything happens for a reason..." wonderful quote..Peace and Love to All

October 02 2011 at 4:00 PM Report abuse rate up rate down Reply
KILO

i see a strange phone number on my cell phone, I just do not answer...i let it go to to voice mail and since I do not listen to voice mail I erase those voice mails. No aggravation. The true blue calls of individuals I know, I have their name marked with the appropriate number and my text messages are wonderful! Sylvie great idea, "Dial a Prayer" Prey on us and they need to Pray....any numbers you can share?

October 02 2011 at 3:54 PM Report abuse rate up rate down Reply
nyyankeesn04

Make the Democrats pay, they got us in this mess.

October 01 2011 at 9:24 AM Report abuse rate up rate down Reply
Sylvie

Give your creditors the phone number for "Dial-A-Prayer" or, better still, one of those numbers that connects to the "Psychic Hotline."

September 30 2011 at 5:39 AM Report abuse rate up rate down Reply
Paul

I wouldn't worry about it .. just change your # and get an unlisted one .. And never give a potential creditor your cellphone #, btw .. Keep a cheap landline just for that purpose ..

September 30 2011 at 5:25 AM Report abuse rate up rate down Reply
Lisa

Pay your bills people! Many of you go into debt never planning for that rainy day. I could lose my job tomorrow and live as I live now for 4 years without a drop of income, And I live pretty well. Why you ask? Because I save for a rainy day!!! If one never comes my kids will be rich!

September 30 2011 at 5:21 AM Report abuse rate up rate down Reply
plumetta

We forgave the banks billions of dollars and then gave them more money. We should forgive the student loans and allow these people to start their lives without this debt. The Banksters got more in bonuses this year than all the outstanding student loan debt, and with our money. Stop the madness.

September 30 2011 at 4:53 AM Report abuse rate up rate down Reply
lilspicey

The people I feel bad for are the ones who are past due on bills because of medical reasons, or lost jobs due to our failing economy.
I for one was a person affected by medical. My husband and I lost our home and I lost my job due to an illness i had no control over. It is an illness that was actually given to me by a hospital during surgery. My husband and I had no problems until I got sick. So, why is it right for bill collectors to call the medically impaired . We will most likely never have a home again, because , unlike in the past, where medical bankruptcy was forgiven for purchasing a home, it is now just lumped in with all bankruptcy's and we are looked on as dead beat people.
I felt so ashamed waiting my turn in line at the court house, as if I had done something wrong.
The illness I got is one of the silent killers today, it shows no signs of it's presence until it is too late. I am now listed as terminal.
What a great way to spend the time I have left, listening to bill collectors yell at me and threaten me, and watch the bank take away my home . We had no choice but to file, and a lawyer agreed, and even encouraged it.

September 30 2011 at 4:17 AM Report abuse rate up rate down Reply
1 reply to lilspicey's comment
Lisa

Sounds like an easy lawsuit to me if you got your condition from the hospital. However, being ill or a failing economy does not give you a free pass on paying your debt. Shyt happens. Sorry.

September 30 2011 at 5:19 AM Report abuse rate up rate down Reply
susan

My friend did this when they call if they start to step over the line, he said I forgot to mention, this call is being taped.. Man they do get really ticked & hang up. This is Obamaism at its worst. Its hard enough to live paycheck to paycheck, or unemployment check. As they suck your minutes like flushing a toilet. When voting time comes think about who approved this plan. You can send them as little at 10.00 a month, your paying what you can, if they dont like it there are other roads to take.

September 30 2011 at 2:58 AM Report abuse rate up rate down Reply
1 reply to susan's comment
Lisa

ur friend is broke but has a cell phone?

September 30 2011 at 5:25 AM Report abuse rate up rate down Reply