Student Loan Company Accused of Debt Forgiveness Delays For Government Employees

If you are having trouble paying off your student loans—and have been looking into loan forgiveness as an option—you might be interested to know about a case in Pennsylvania accusing the Pennsylvania Higher Education Assistance Agency of mishandling borrower accounts.  In the case, Massachusetts Attorney General Maura Healey is suing the PHEAA for prolonging the length of time that borrowers need to wait before they can have their debt wiped clean under the Public Service Loan Forgiveness program (PSLF).

This initiative was set up to allow for borrowers who have obtained employment with the government, or with certain non profits, to have their federal student loans forgiven after 120 months—or 10 years—of payments (regardless of the balance). If you take a job in public service, education, or non-profit, then, you might be eligible for such stipulations.

In the suit, though, the PHEAA—which has the sole government contract to work with borrowers in regards to repayment—delayed the processing of paperwork, which forces borrowers to pay their debts for longer than should have been necessary before receiving their forgiveness. The suit actually dates back to 2007 but is now getting a little more public exposure because the first group of borrowers will soon be eligible for forgiveness.

Or rather, they were supposed to be eligible.

The lawsuit also claims that the PHEAA made a mistake and charged tens of thousands of student loan borrowers but has not refunded the difference to correct the mistake, nor have they gone so far as to even notify borrowers of the error.

National Consumer Law Center director of the Student Loan Borrower Assistance Program, Persis Yu, notes, “Some borrowers are going to pay too much and they are going to be materially harmed. This is really why we need greater consumer protection in the student-loan sphere.”

Of course, the PHEAA disagrees with these allegations listed in the suit. Spokesperson Keith New said, recently, that the firm will cooperate with the United States Department of Education to sort out any issues that have been identified by Healey’s office.

In his statement, New said, “PHEAA remains committed to appropriately resolving any outstanding borrower issues while following the U.S. Department of Education’s policies, procedures and regulations as mandated by the Agency’s federal contracts.”

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