FMS's parent, Ceannate, is one of about two dozen collection firms paid a total of $963 million in the fiscal year that ended in September, according to the Education Department. That's down from a record $1.1 billion the previous year.

The Education Department is bidding out a new contract, the largest ever, as the volume of defaulted federal loans reaches an all-time high and fees have tripled over the past decade. In July, the agency changed to a fixed fee for rehabilitated loans from a percentage of what was collected.

Collection companies helped recover about $9 billion on more than 1.5 million loans from 2011 to 2013, according to a 2014 Government Accountability Office report.

"Everyone who touches the system performs a different role that adds value to the student," said Balaji "Raj" Rajan, chief executive officer of Rolling Meadows, Illinois-based Ceannate. "It's a complex process, and the system would work better if there was more stability. It's very hard on a program this vast to serve every single borrower without a single failure."

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