Student Loan Manager Agrees to Relieve Borrower in Massachusetts Settlement
BOSTON (Reuters) – One of America’s largest student loan managers has agreed to settle a lawsuit filed by the Massachusetts attorney general, claiming that the mismanagement of thousands of loans was jeopardizing a federal debt relief program.
Massachusetts Attorney General Maura Healey said the settlement with the Pennsylvania Higher Education Assistance Agency, which serves $ 355 billion in federally-owned student loans, would offer unique relief to state borrowers. A judge approved it on Tuesday.
Healey, a Democrat, sued the PHEAA, which does business as FedLoan Servicing, in 2017, accusing it of deceptive practices that caused public servants to lose benefits and financial assistance under two federal programs.
A program allows for the cancellation of student loans after about 10 years of public service. The other offers grants to borrowers who pursue a career in teaching in low-income schools for at least four years.
Healey said the PHEAA has prevented borrowers from making qualifying monthly payments that count towards loan cancellation and also overcharged students.
Under the settlement, up to 250,000 Massachusetts borrowers whose federal loans to PHEAA services could request a detailed account review. The PHEAA should try to correct any service errors it identifies and, if it cannot, pay borrowers.
The PHEAA must also reimburse teachers whose grants were mistakenly converted into loans, Healey said.
PHEAA, a quasi-government agency created by the state of Pennsylvania, has not admitted wrongdoing. In a statement, he said the deal reaffirms his commitment to all student borrowers.
Former Republican President Donald Trump’s administration backed the PHEAA, with the Justice Department arguing in 2018 that Healey could not sue under state law as long as they were in conflict with federal law.
But a judge refused to dismiss the case.
New York Attorney General Letitia James also sued PHEAA in 2019, after the Education Department’s Inspector General criticized the agency for failing to take action against PHEAA and other agents for their mistakes.
Reporting by Nate Raymond in Boston; Editing by Sonya Hepinstall