Dem Senators Say Mismanaged Student Loan Program Screwed Thousands

2019-10-30 07:50:47

A group of Democratic senators demanded that the top consumer financial watchdog agency immediately investigate an embattled student loan servicer and its alleged mismanagement of a federal program designed to forgive the loans of teachers, nurses, firefighters and other public service workers.

The 23 senators said in a Monday letter addressed to Kathleen Kraninger, the director of the Consumer Financial Protection Bureau, that the Pennsylvania Higher Education Assistance Agency had committed many “missteps” and “errors” in its servicing of the Public Service Loan Forgiveness program ― resulting in “harm to tens of thousands of public service workers and their families.”

The letter, signed by 2020 presidential contenders Elizabeth Warren, Bernie Sanders, Cory Booker, Kamala Harris and Amy Klobuchar, was obtained by NPR.

PHEAA ― a quasi-governmental agency that does business as FedLoan ― is the sole servicer of the PSLF program, which was established in 2007 and was  meant to forgive the remainder of public service workers’ federal student loan debt after they make 10 years of qualifying payments.

PHEAA, however, has been accused of grossly mismanaging the program, leading to the denial of loan forgiveness for the vast majority of applicants — even eligible ones.

The New York Times, citing data from the Education Department, said in July that the program was a “spectacular failure.”  

“In the 18 months after borrowers with a decade of service in government or nonprofit jobs first became eligible [for the program] in 2017, 73,554 people applied to have their student loans wiped out. And 73,036 were turned down — a rejection rate of 99.3 percent,” the Times reported. 

As the senators’ letter pointed out this week, government watchdogs have repeatedly called out the PHEAA’s mismanagement of the program over the years. Yet, the senators wrote, “the CFPB has refused to exercise its authority to conduct supervisory examinations of PHEAA’s servicing practices and its management of the PSLF program.”

“We have repeatedly pressed the CFPB to conduct this critical oversight, but you have provided nothing but excuses for the CFPB’s inaction,” the lawmakers said.

New York and Massachusetts have separately sued PHEAA for its failure to adequately service the PSLF program. 

New York Attorney General Letitia James said in her complaint, filed in Manhattan federal court earlier this month, that “PHEAA’s abuses have not only denied these dedicated public servants the benefits they have earned, but have undermined the goals of the loan forgiveness program.”

A spokesman for PHEAA told the Times that the allegations in the New York suit were “without merit.” 

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