New York Attorney General Letitia James has secured student debt relief for thousands of New York borrowers whose federal loans were allegedly mismanaged by the Pennsylvania Higher Education Assistance Agency (PHEAA). In an agreement with the Office of the Attorney General (OAG), PHEAA is required to audit thousands of accounts to identify errors that may have caused borrowers to miss out on benefits, such as income-driven repayment (IDR) plans or debt forgiveness for eligible borrowers under the Public Service Loan Forgiveness (PSLF) program. PHEAA, which operates as FedLoan Servicing and American Education Services (AES), will correct errors identified in borrowers’ accounts and provide monetary relief as restitution for some borrowers as appropriate. More than 300,000 borrowers are eligible to have their accounts reviewed for free and are encouraged to request an audit. This agreement resolves an earlier lawsuit brought against the student loan servicer over allegations that it failed to properly manage student loans and administer the PSLF program by inaccurately counting loan payments, improperly denying applications, and not processing applications in a timely manner.
“Negligent student loan servicers like PHEAA left countless students buried in debt and contributed to the national student debt crisis,” said Attorney General James. “As one of the largest student loan servicers in the country, it’s a shame that PHEAA did not do more to help students and caused public servants to miss out on loan forgiveness. Today’s agreement will correct years of mismanagement by PHEAA and put borrowers on a path to finally being debt free. We must all do our part to tackle the student debt crisis and that means holding negligent student loan servicers accountable for their role in creating it.”
Under the agreement, PHEAA will automatically review the accounts of nearly 10,000 New York borrowers for potential errors. In addition, more than 300,000 current New York residents with an active Direct Loan or Family Federal Education Loan (FFEL) that is currently being serviced by PHEAA or was serviced by PHEAA as of December 1, 2021 may be eligible to have their accounts reviewed at no cost to borrowers. A complete description of those borrowers who are eligible can be found on OAG’s frequently asked questions page.
