Unpaid tuition bill (not student loan) went to collections, what do I do?

I attended college Spring 2009 and my Financial Aid was stopped on me due to having low passing credits (even though it was due to an adviser putting me in courses that were above what I assessed for). I continued the semester because they told me that I had a good chance of regaining financial aid if the board finds that the adviser had done that. Of course my luck, they say he didn't and now I am stuck with an unpaid tuition bill. The letter reads as following:




Dear Richard:

Since we have had no response to the final notice letter dated August 6th regarding your past due account, we are referring your account to collection to:

Mercantil Adjustment Bureau, Inc.
40 West Avenue
Rochester, NY 14611

The past due amount referred to them will be $2,735.35 in principal.

You will incur additional collection costs of up to 28% compounded on the amount you owe the College.

If it becomes necessary to take legal action to collect this amount, any attorney fees and/or court costs will be added to the amounts above.

This account will be referred on September 15, 2009. After that date, any correspondence regarding your account should be directed to Mercantile at the address given above. Once your account is referred to the collection agency, your credit rating will be affected.

It is with regret that Corning Community College finds it necessary to use this action on your account.

Sincerely,

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Now, I'm on 21 years old and never been in any financial trouble before. I work a minimum wage job, live at home still, and don't have a lot to my name except my car (which is registered in my father's name).

I'm not sure what all of this means; principal, additional collection costs.

The CA has yet to contact me, and I'm not sure what to do, what to expect or when they will.

Can anyone kindly explain all of this to me? Thanks :)