In the last 12 years, the Kentucky Department of Revenue has claimed in excess of $50 million from students behind on payments to Kentucky’s public universities. The department has managed to do so by taking money out of the students’ tax refunds and paychecks without a court order. It has also collected a hefty amount in fees as well, tacking on a 25 percent collection charge that the people owing the money have to pay.
The ability to collect those debts in that fashion may change soon since one county judge in Kentucky has ruled that UK HealthCare’s use of the revenue department in a similar way for collecting on medical debts from patients is illegal, according to Tribune News Service.
The Aftermath of the Ruling
After the judge issued that ruling, Kentucky public universities took notice since that department collects the debt for all Kentucky public universities with the exception of the University of Louisville. The debt that is collected is usually owed because of students falling behind on tuition payments.
As UK HealthCare attempts to appeal the court’s decision, five universities lent their support, informing the court the decision could be disastrous for the schools which depend heavily on the money collected by the department of revenue. The schools who filed a brief in court were Morehead State University, Western Kentucky University, Eastern Kentucky University, Murray State University, and Kentucky Community and Technical College System.
Jane Fitzpatrick, Morehead State University general counsel, penned the motion that was sent to the court.
“This is important because it’s a substantial way of our collecting monies that are owed the commonwealth,” Fitzpatrick said, according to Tribune News Service.
Because of decreases in state funding to universities, Fitzpatrick said tuition money now makes up the majority of the budget at Morehead State. If students don’t pay their tuition installments, the budget really takes a hit.
Meanwhile at Kentucky Community and Technical College System, out of the nearly $80 million in outstanding debt the university has forwarded to the revenue department, $44.8 million has been collected.
The Issue With How the Revenue Department Does Business
Those who are against how the revenue department can collect money without a court order argue that it bypasses a student’s right to due process. While other collection agencies have to appear in court to be awarded their judgments, the revenue department doesn’t have to go through that process.
Some students have complained about being told their wages will be seized while they are still in the process of fighting their bills. But Fitzpatrick said, at Morehead State University at least, students are given many notices before their late payments reach that point. She said students also have the opportunity for appeals.
Another complaint opponents have of the revenue department’s way of doing business is that the 25 percent fee passed onto the debtor is excessive in their eyes. Some critics have stated it’s much more than other collection agencies would be allowed to charge. Currently, 19 stage agencies use the revenue department for their debt collections.
No matter how this particular case plays out, for any student facing debt collection of unpaid tuition or student loans, it’s important to know the options. Ignoring the debt tends to make the situation worse and could lead to garnishment of tax refunds or paychecks. Instead, communicating with the school or lender might result in a more manageable payment plan. If there’s a dispute over what’s owed, it might be worthwhile to speak with a legal or debt expert to work toward an agreement.
Author: Shannon Serpette
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