Yesterday, August 23rd, Massachusetts Attorney General Maura Healey filed a lawsuit against the Pennsylvania Higher Education Assistance Authority (PHEAA), according to a press release issued by the office of the Massachusetts Attorney General.
PHEAA, one of the largest student loan servicers in the United States, is being charged by Healey for violating Public Service Loan Forgiveness (PSLF). PSLF is a federally-run student loan program that offers loan forgiveness to borrowers who have made timely payments and have worked in a public-service job for 10 years. Typically, government and nonprofit employees are the student loan borrowers that qualify for forgiveness.
The lawsuit, which was filed in Suffolk Superior Court, argues that PHEAA violated both state and federal loans by causing teachers and other public employees to lose the benefits and financial aid that they were entitled to under PSLF and the Teacher Education Assistance for College and Higher Education (TEACH) Grant program.
The lawsuit also makes a point to mention that PHEAA was violating the law while doing business under the name “FedLoan Servicing.”
Attorney General Maura Healey delivered the following statement for the press release: “This company’s actions have jeopardized the financial futures of teachers and public servants across the country. These federal programs allow Americans from all backgrounds to dedicate their careers to serving others. My office will protect PSLF and hold PHEAA accountable for forcing these students further into debt.”
The U.S. Department of Education had awarded PHEAA with a contract to exclusively handle both the PSLF and TEACH programs. According to the press release, more than a million student loan borrowers have taken on a public service job and have met all the requirements that are needed to be eligible for student loan forgiveness and grants.
However, Healey claims that PHEAA has prevented these borrowers from making the monthly payments that are needed to qualify for student loan forgiveness. By doing so, PHEAA’s own failures as a student loan servicer have now directly impacted the student loan borrowers.
The lawsuit also claims that PHEAA was overcharging student loan borrowers, while also preventing the student debtors from keeping pace with Income Driven Repayment (IDR) plans that make their loan payments more manageable. Mealey’s lawsuit claims that PHEAA was well aware of these issues, but failed to do anything to solve the problems.
The lawsuit filed against PHEAA is seeking restitution, relief, civil penalties, and reimbursement of Massachusetts costs and expenses for PHEAA’s unlawful student loan servicing methods.
According to the Massachusetts Attorney General’s press release, PHEAA handles more than a quarter of the U.S.’s $1.41 trillion student loan debt for multiple student loan lenders. The student loan servicer also manages the student loan accounts for more than 100,000 student debtors from Massachusetts with a total outstanding principal balance of more than $5 billion.
Back in late June, a report surfaced that stated Attorney General Healey was threatening to sue PHEAA over their handling of federal student loans. At that time, Healey had sent a letter to PHEAA to inform the agency that they were at the center of an investigation and potential lawsuit. An official from PHEAA was able to confirm that he received the letter, but all he said was that it dealt with consumer protection issues centered around federal student loans. The exact reasoning behind the lawsuit was kept a secret until Healey filed the suit yesterday.
It seems that lawsuits and the student loan industry go hand-in-hand. On August 21st, LendEDU reported that the CFPB filed a complaint and proposed settlement that would put 41,000 student loan borrowers in the position to have their student loans forgiven. That case revolved around a predatory lending scheme involving Aequitas Capital Management and the for-profit Corinthian Colleges. On August 14th, LendEDU covered the story regarding a federal judge that ruled a lawsuit against Wells Fargo pertaining to student loan lending discrimination was allowed to proceed in court. The accusations against Wells Fargo claim that the bank and student loan lender was denying student loans to qualified college students because of their citizenship or immigration status.
Author: Mike Brown
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