Pennsylvania Higher Education Assistance Agency Settles Massachusetts Lawsuit
The loan manager responsible for managing a federal loan forgiveness program has agreed to review and, in some cases, repay the loans of more than 200,000 Massachusetts borrowers at adjust a lawsuit brought against him by the Massachusetts attorney general’s office.
The Pennsylvania Higher Education Assistance Agency, which operates as FedLoan Servicing, exclusively administers the Public Service Loan Forgiveness Program and the TEACH Grant Program nationwide.
The company had been accused by Massachusetts Attorney General Maura Healey in 2017 of “unfair and deceptive” acts, in which the company alleged errors and misinformation preventing people from making payments to cancel their loans in the part of the national public service loan forgiveness program. Healey also accused the company of making processing errors that have led people to derail their income-driven reimbursement programs and, in some cases, wrongly convert aid to teacher training for college and graduate scholarships in loans, which teachers had to repay.
A spokesperson for the company, Keith New, stressed that the regulation, which was announced Wednesday, “does not impose any fines or civil financial penalties on the PHEAA and does not contain any admission of wrongdoing.”
He said, “The Settlement Agreement reaffirms our commitment to all student borrowers and to the high quality of customer service provided by PHEAA in managing their student loan debt. PHEAA strives to resolve service issues quickly and accurately for borrowers in Massachusetts and across the country, in accordance with federal program rules as set forth by Congress and the US Department of Education. “
Still, the settlement could entail costs for the company. The PHEAA, in part, has agreed to review cases in which clients have been denied the right to enroll in the loan forgiveness program.
To the extent that the company made errors or misrepresented the eligibility requirements for the program, it has agreed to credit customers for money lost as a result and in some cases send customers a check for repay them. In cases where grants were incorrectly converted into loans, the company agreed to repay all money paid and repay the remaining loans.
“Public servants burdened with student loan debt are entitled to the relief promised to them under these federal programs,” Healey said when announcing the settlement on Wednesday.
The case only affects loans serviced by the company in Massachusetts, but consumer advocates have said the settlement is important to illustrate screening officers who intervene in states to administer the 2007 loan forgiveness program. public service. The program allows those who work continuously for 10 years in the nonprofit or public sector and make payments during those 10 years to get their remaining student loan debt canceled.
In 2019, New York Attorney General Letitia James also sued the Pennsylvania Higher Education Assistance Agency, alleging that his inability to administer the loan forgiveness program led many who would have qualified to be rejected. The California Department of Business Oversight is also investigating whether the company incorrectly converted TEACH grants into loans and, in April, for follow-up the company to disclose documents related to the investigation.
“The truth is that loan officers failed to inform borrowers of their rights, misled them by disqualifying repayment programs, and ultimately shut down hundreds of thousands of teachers, social workers, nurses , firefighters and other civil servants to benefit from the forgiveness of their loan. won, ”said Cody Hounanian, program director for the Student Debt Crisis advocacy group.
“This action should be a wake-up call to the Department of Education – every teacher and public servant across the country deserves to be healed after a decade of industry abuse and mismanagement of the government. Today’s action is a critical step in rebuilding our broken student loan system, ”said Seth Frotman, executive director of the Student Borrower Protection Center and former deputy director and student loan ombudsman for the Consumer Financial Protection Bureau. under the Obama administration.
The regulation is also important in showing states’ authority to regulate duty officers, said Lisa Stifler, director of state policy for the Center for Responsible Lending. “For a number of years, federal loan managers such as PHEAA and Navient have asserted that federal law provides for prosecution by states, including Massachusetts, based on violations of national protection laws. consumers, in particular laws on unfair and deceptive practices. The courts have categorically rejected these arguments. This regulation reflects the essential role that states play in ensuring that managers do not engage in unfair or deceptive acts and practices, even if they are servicing federal loans, ”she said.
Last week, service giant Navient was ordered by the Department of Education to reimburse $ 22 million to its former sister company Sallie Mae because it overcharged the agency for federal grants in the early 2000s.
Monday, three student borrowers would have filed a petition in New York bankruptcy court to force Navient’s service arm out of business, alleging he was owed $ 45 million in money the company illegally collected.