Katherine Webster  |  February 26, 2021

Category: Legal News

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A young man wearing glasses and a backpack holds a stack of four books in his right hand and a blue piggy bank in his left hand - pheaa

 

The state of Massachusetts has reached a settlement deal with the Pennsylvania Higher Education Assistance Agency (PHEAA) that would allow borrowers to obtain an account review and potentially receive compensation.

The settlement will provide individualized account reviews and relief for thousands of student loan borrowers in Massachusetts, according to a news release from state Attorney General Maura Healey.

Borrowers are eligible to make a claim if they lived in Massachusetts at any point after Jan. 1, 2013, and have a federal student loan owned by the U.S. Department of Education and serviced by FedLoan Servicing.

Claim forms are expected to be sent to eligible borrowers either by mail or email between March and July 2021.

The settlement resolves allegations that PHEAA, doing business as FedLoan Servicing, made certain errors and provided borrowers with misinformation about the requirements for federal Public Service Loan Forgiveness (PSFL) program eligibility, the release said. This misinformation allegedly caused borrowers to lose months of qualifying payments toward forgiveness of their loan.

A person fills out a student loan appilcation - pheaa

Borrowers whose loan is serviced by American Education Services are not eligible to make a claim in this settlement.

In addition, the settlement resolves claims that PHEAA delayed processing applications for  Income-Driven Repayment (IDR), which in turn led borrowers to become off track with payments and caused recipients of Teacher Education Assistance for College and Higher Education (TEACH) Grants to erroneously have their grants converted to loans.

Healey estimates more than 200,000 Massachusetts borrowers will be eligible to submit a claim for an account review.

If during the course of the account review a servicing error or misrepresentation is discovered, PHEAA will be required to make corrections to restore borrowers’ rightful statuses under the federal programs, according to the release.

In the event such corrections are not possible, PHEAA will be required to pay borrowers based on a damages model that calculates a dollar value for each month the borrower lost progressing toward loan forgiveness, regardless of whether that borrower completes the PSLF program.

Also as part of the settlement, PHEAA must repay teachers whose financial TEACH grants were converted to loans if the teacher did not otherwise receive relief from the U.S. Department of Education.

More information on the settlement claim form, types of loan forgiveness programs, and IDR plans is available on the Massachusetts attorney general’s PHEAA settlement FAQ page. 

Are you a Massachusetts resident with a student loan serviced by PHEAA? Do you plan to take advantage of this settlement? Let us know what you think in the comment section below.

The Massachusetts Student Loan Lawsuit is Commonwealth of Massachusetts v. Pennsylvania Higher Education Assistance agency, d/b/a FedLoan Servicing and American Education Services, Case No. 1784-02682 BLS2, in Suffolk Superior Court.

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One thought on Massachusetts Attorney General, Student Loan Servicer PHEAA Reach Settlement

  1. Rachel Adams says:

    I am a first generation college student who is working full time as an educator and putting myself through graduate school. I saw that on Oct. 6, 2021, the U.S. Department of Education (ED) announced a temporary period during which borrowers may receive credit for payments that previously did not qualify for PSLF or TEPSLF.

    Upon investingating this further, I am seeing that this law siut was filed which affected me! Back in 2020, I was removed from PSLF becuase I enrolled in graduate school. I had requested that I stay eligible in the PSLF program because I have maintained full-time employment through a qualifying employer with , and the advice I was given from PHEAA contradicted the Federal Student Aid information regarding my PSLF enrollemnt status. I am looking over my payment records and it appears that I should have qualified for PSLF since 8/2020. This would put me behind for 14 months to date toward paying off my loans which I believe is unethical. I want this error to be resolved and get back the 14 months of time that I should have qualified for PSLF.

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