August 24, 2017
Student loan company accused of delaying debt forgiveness for teachers and social workers
A student loan company is creating barriers for teachers, social workers and others to get the loan forgiveness they’re entitled to, according to the Attorney General of Massachusetts.
Attorney General Maura Healey sued the Pennsylvania Higher Education Assistance Agency (PHEAA) on Wednesday, accusing the company of mishandling borrowers’ accounts and prolonging the amount of time they’d have to wait to have their debt wiped away under the Public Service Loan Forgiveness program (PSLF).
The initiative allows borrowers who work for the government and certain types of nonprofits to have their federal student loans forgiven after 120 months or 10 years of payments.
But according to Healey’s suit, PHEAA, which has the exclusive government contract to work with borrowers in the forgiveness program, delayed processing borrowers’ paperwork, which will ultimately force them to pay their debts for longer than necessary before receiving forgiveness.
The suit comes months before the first group of borrowers will become eligible for forgiveness under PSLF — which began in 2007 — this fall. Advocates have worried for years that borrowers relying on the program may face challenges accessing forgiveness. They say student loan servicers — the companies hired by the federal government to help borrowers manage their debt — create confusion and make paperwork errors that keep borrowers from reaping the program’s benefits. The Trump administration has also proposed eliminating the loan forgiveness program.
The lawsuit highlights some of those fears. According to the complaint, PHEAA didn’t process borrowers’ paperwork in a timely fashion, and pushed borrowers into forbearance — a status that pauses payments on loans, but doesn’t count towards forgiveness. In addition, when a borrower is in forbearance interest capitalizes on their loan.