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Student Loan Servicer Settles Allegations of Interfering with Borrowers’ Ability to Seek Loan Forgiveness

  • Massachusetts AG Maura Healey reached a settlement with federal student loan servicer Pennsylvania Higher Education Assistance Agency d/b/a FedLoan Servicing (“PHEAA”) over allegations that it deprived eligible student borrowers of relief they were entitled to under federal programs that offered loan forgiveness and grants for public-service jobholders in violation of state and federal consumer protection laws.
  • The complaint alleged, among other things, that PHEAA prevented student borrowers from making qualifying monthly payments required for loan forgiveness under the Public Service Loan Forgiveness program, misprocessed Income Driven Repayment plans designed to make monthly payments more affordable, and erroneously converted Education Assistance for College and Higher Education (“TEACH”) grants into loans.
  • Under the terms of the settlement agreement, PHEAA is required to undergo an audit that would allow borrowers to submit a claim for a detailed account review, and also is required to correct all servicing errors or misrepresentations uncovered by such a review. If an account correction is not possible because the loan was already forgiven, PHEAA will be required to pay monetary relief based on the dollar value of a borrower’s lost months progressing towards loan forgiveness. PHEAA is also required to implement enhanced quality assurance review practices to identify and prevent future servicer errors, among other things.