Universities join forces to save on collections

Iowa's three public universities are joining together to collect more than $15.5 million in outstanding tuition, specialized loans and various other charges.

The University of Iowa, the University of Northern Iowa and Iowa State University have issued a joint request for proposals from external agencies to help collect funds from current and former students, as well as customers of university services.

Officials at the universities say it is "not uncommon" for the three to use one another's contracts or to participate jointly in an RFP.

"Coincidentally, this is the first time all three have been able to align their contracts to participate in a joint bid," said Christina Geweke, UNI's accounts receivable manager. "Previously one or another may have been using a contract negotiated by the other."

ISU officials said their contracts were scheduled to come due, so they reached out to the other institutions to see if they wanted to participate in the university's proposal. UNI and UI extended their contracts for "a short time period" to coincide with ISU's timeframe, and ISU issued the proposal on behalf of all three schools.

Combining the contracts was not an explicit recommendation from the Transparent, Inclusive Efficiency Review conducted by the Iowa Board of Regents last year, but it is in keeping with the "strategic sourcing component" of that study..

"This is just another example of that collaboration," Geweke said.

By the numbers

According to the RFP, during the past two years:

• UNI has placed an average of $2 million each year with external collection agencies — including $1.2 million for federal Perkins loans and other specialized loans. (Although the federal government oversees the repayment of most federal student loans, the Perkins Loan fund is replenished by collections efforts by the schools on outstanding loans.)
• ISU has placed an average of $6 million each year with external collection agencies — including $3.5 million for federal Perkins loans and other specialized loans.
• UI has placed an average of $7.5 million each year with external collection agencies — including $3.8 million for federal Perkins loans and other specialized loans, such as Health Professional and Nurse/Faculty loans.

Although the totals sent for collection are in the millions, the amounts are statistically small, since the universities are billion-dollar operations, officials said.

No outstanding account is sent to outside collection agencies until after a university's internal collection service has spent months offering multiple repayment options to a former student, officials said.

"The goal is to avoid the collection agencies and not impact (the former student's) credit report," said UI spokeswoman Jeneane Beck.

Student debt concerns

There isn't a direct connection between the universities' recent efforts to reduce the amount of debt students amass during their studies and the collection of unpaid tuition and loans on the back end, Beck said.

"Taking on manageable debt is necessary for many students and a sound investment considering their increased earning potential with a four-year degree," Beck said. "Providing counseling on the front end may lessen the need for collection efforts on the back end, but that's not the primary goal."

In 2013-14, the percentage of students graduating without debt was 40.7 percent for UI, 35.8 percent for ISU and 25.1 percent for UNI, according to statistics provided by the Iowa state Board of Regents. The national average in 2012-13 for four-year institutions was 41 percent.

Costs of collection

Iowa State University

In 2013, Iowa State University had $1,926,585 sent out in first placement with external agencies for the university's open accounts — which include tuition, u-bill charges and unpaid general customer invoices, according to numbers provided by the university.

For that calendar year, the agencies collected $842,736 — with the university paying $140,768 to the agencies. ISU then recovered $75,298 of those expenses from the borrowers.

In 2014, the school saw slightly higher collection and recovery rates for the $2,856,751 put out in first placement with external agencies.

For the $908,012 and $594,237 that ISU sent out in first placement for specialized loans during 2013 and 2014, the agencies collected $554,561 and $447,444m respectively.

For the money collected on those specialized loans, ISU paid a higher rate of fees to the external agencies, but also recovered nearly all of those expenses from the borrowers.

University of Iowa

In the three-year period from 2011 to 2014, the University of Iowa placed with external collection agencies $20.9 million for open accounts and $25.2 million in specialized loan accounts.

For those amounts, the agencies were able to collect $1.3 million and $1.2 million, respectively.

UI paid $647,000 in collection fees on the open accounts, which also included collections on all earlier accounts, and the borrowers paid $238,000 in fees on the specialized loans.

The University of Northern Iowa declined to provide information on their collection costs.

Reach Jeff Charis-Carlson at 319-887-5435 or jcharisc@press-citizen. Follow him @jeffcharis.