Mass. AG Settles Lawsuit With Student Loan Servicer

The Attorney General of Massachusetts has announced a “first-of-its-kind” settlement with a student loan servicer that had been sued for allegedly engaging in unfair and deceptive practices that will require it to audit all 200,000 of its accounts in the state to determine if an error or misrepresentation was made and restore borrowers “to their rightful statuses” under a federal loan forgiveness program. If that is not possible, then the servicer — Pennsylvania Higher Education Assistance Agency (PHEAA) — must make monetary payments to borrowers.

PHEAA was accused by Maura Healey, the Attorney General of Massachusetts, of “undermining” the Public Student Loan Forgiveness program, which offered individuals who went into public service the opportunity to have their student loans forgiven by the federal government. Her office originally filed a lawsuit against PHEAA back in 2017, alleging it overcharged borrowers and did not allow them to make payments that would have put them back on track to have their loans forgiven.

“Public servants burdened with student loan debt are entitled to the relief that they were promised under these federal programs,” Healey said in a statement. “As a result of our hard-fought litigation against PHEAA, this agreement secures first-of-its-kind relief for teachers and other public servants that we rely on to keep our communities safe, healthy, and educated – especially during this public health crisis.”

PHEAA must also repay teachers whose grants were transferred into loans erroneously and have not already received relief from the Department of Education.

Under the terms of the settlement, borrowers can submit a claim form to have their account reviewed, or, if it has been denied for just about any reason, will have their account reviewed automatically. PHEAA will be required to review the payment history, the notes from any telephone calls, the recordings from those calls, and any correspondence between it and the borrowers, among other information.

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