Katie Otersen, 23, on the campus of George Mason University in Fairfax, Va. (Salwan Georges/The Washington Post)

When Katie Otersen transferred from Northern Virginia Community College to George Mason University last fall, she braced for a jump in price. Tuition and fees would total $11,300, more than double what she had paid before. She covered expenses the first semester without taking out loans. But she struggled in the second.

Little by little, Otersen paid down her bill with earnings from a job at a salon, but she still owed nearly $3,000 when classes ended. When she sought to make another payment in May, she was shocked to learn that her account had been sent to a collection agency that tacked on a fee of 30 percent. She can’t continue at Mason unless she pays it.

“I can’t argue or negotiate this. I’m just stuck paying almost $1,000 more,” Otersen, 23, said. “The fact that they charged me as a student who has been paying throughout the semester this 30 percent fee is disgusting.”

Otersen is one of thousands of Virginia students caught in a state-sanctioned debt trap. These students lack the money to pay their bills on time, and are penalized in a way that makes it harder to meet the obligation.

A little-known Virginia statute requires public colleges and universities to shuttle student accounts of less than $3,000 that are 60 days past due to private debt collectors. Those companies can charge up to 30 percent of the outstanding balance as a fee. That fee is far more than the interest on most credit cards, or on any car loan or mortgage, and it can add hundreds of dollars to student debt. Past-due accounts of more than $3,000 are referred to the state attorney general’s office to enforce collection. That also results in a 30 percent fee.

Schools across the country use debt collectors for delinquent accounts. The issue is when to make those referrals, and how much the associated fees add to the bills.

Those in Virginia handle the fees in various ways. The College of William & Mary, with enrollment of 8,600, caps the fee at 20 percent. College spokeswoman Suzanne Seurattan said fewer than 1 percent of student accounts wind up with debt collectors.

Mason, the state’s largest public university, has about 35,000 students. About 1 percent of its accounts go to collectors, a spokesman said.

The arrangement is striking because universities have the tools to collect payments through their bursar’s offices. Yet the state law forces them to seek outside help as a last resort.

Colleges typically incur no expense in employing private collectors because the companies take their cut through fees. Say a student had an outstanding balance of $1,000. The collection agency could assess a 30 percent fee, bringing the total due to $1,300. The college recovers its $1,000, and the company gets the rest.

“This is a surcharge for the student, just a penalty for the student,” said Adam Minsky, an attorney specializing in student loan law. “It just makes it that much harder, take that much longer, to pay back what they owe.”

With state budgets stretched thin over the years, legislatures have cleared the way for public agencies to seek assistance from the private sector to recover unpaid debts. At least 15 states have laws instructing schools to employ collection agencies when they are unsuccessful in their own attempts, according to the National Conference of State Legislatures.

Even without a state mandate, the vast majority of colleges and universities use private collection agencies, said Anne C. Gross, vice president of regulatory affairs at the National Association of College and University Business Officers. Eighty-seven percent of schools surveyed by the trade group said they relied on such companies, she said, noting that the practice and fee structure have been around for decades.

“Schools aren’t eager to send student accounts to collections . . . but they have limited staff who can’t keep working on the same accounts. It’s not cost efficient,” Gross said. “I would suspect that any student whose account had gone to collections has ignored or failed to respond to six, seven, eight notices from the school.”

In many ways, the federal government set the standard with its collection of Perkins loans, which are provided to low-income students through a cost-sharing agreement with colleges. The Education Department lets colleges impose fees as high as 40 percent of the balance when students default on those loans, and that cost structure has become the norm for other delinquent accounts.

But those fees may be placing students with limited means at risk of falling behind in school and not graduating.

Because of the money she owes, Otersen said she is not allowed to register for fall classes at Mason. Some of the courses she needs to complete a bachelor’s degree in athletic training have filled up. And even if a slot opens, Otersen worries that her bill will not be paid in time. Working 60 hours a week at the salon this summer has only made a dent in the debt, she said.

“I’m so overwhelmed. I just finished paying the collection fee. School starts in less than a month and I still have to come up with the rest,” she said. “My mom tries to help, but I have two other siblings in college and there is only so much money to go around.”

Mason spokesman Michael Sandler said the university is “sensitive to those situations where students require more time for payment” and “has several options for students with hardships, including multiple payment plans that charge no interest.”

Otersen said she considered one of those plans but could not afford to pay the installments in the three months allotted. She knew her piecemeal payments would result in late fees but thought that as long as she paid, the school would consider her account in good standing. But the balance she carried from one month to the next registered as delinquent.

Sandler said Mason often gives students five months and eight notices to make arrangements to settle their accounts. Unpaid debts, in most cases, are not referred to a collection agency until after the semester ends, he said.

“We can’t allow students to create their own payment plans,” Sandler said. “We are bound by state law and have an obligation to be responsible stewards of the taxpayers’ money.”

Not all Virginia schools enforce the 13-year-old state statute in the same way. Virginia Comptroller David Von Moll said schools have some leeway depending on their level of autonomy from the state.

Years ago, state colleges and universities agreed to less public funding in exchange for more independence in setting tuition, capital spending and curricula.

Wealthier schools opted for the highest level of autonomy and have more flexibility on financial matters such as debt collection. Two examples are the University of Virginia and Virginia Tech. They only send past-due accounts to collectors if students are no longer enrolled.

U-Va., with enrollment of about 24,000, refers fewer than 100 accounts a year to collectors. Spokesman Anthony P. de Bruyn said U-Va. “takes extensive steps to avoid using outside collection agencies, preferring instead to work to keep students enrolled and to support them to successfully graduate.”

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