It’s Time for Education Secretary Betsy DeVos To Get Serious About Holding Student Loan Servicers Accountable

March 6, 2019

The $1.4 Trillion Federal Student Loan Program Has Been Grossly Mismanaged Under DeVos’ Watch

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WASHINGTON, D.C. – Today, the House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies will hold a hearing on protecting vulnerable student loan borrowers against the abuse and potential fraud being committed by student loan servicers. Chaired by Congresswoman Rosa DeLauro of Connecticut, this is an opportunity to shine a light on companies such as Navient and Nelnet and some of their shady and unethical behavior in the student loan industry and how Trump administration officials are protecting them from scrutiny.

Since Trump came to office, Secretary of Education Betsy DeVos has strategically protected student loan servicers through non-enforcement of federal guidelines while weakening state attorneys general authority to investigate and sue servicers through state consumer protection laws. In December of last year, Sen. Patty Murray, the Ranking Member of the Senate HELP Committee, along with 24 of her Senate Democratic colleagues wrote a letter to DeVos imploring the Education Department to ensure student loan servicers were not just following the law but operating in the best interests of borrowers.

“President Trump and Betsy DeVos have clearly favored their wealthy friends in the student loan servicer industry at the expense of the 42 million student borrowers they’re neglecting to protect from abuse and fraud. DeVos, with a wink-and-a-nod from Trump, has neutered federal consumer protections for student loan borrowers by weakening enforcement actions from the CFPB while also preventing state attorney generals from using their power to hold servicers accountable,” said Patrice Snow, spokeswoman for Allied Progress.

Snow continued,“Today’s hearing is an important first-step because Congress cannot and should not let this kind of financial abuse stand. Student borrowers are often living on the financial edge and it’s shameful that companies like Navient and Nelnet are being protected by Betsy DeVos and Donald Trump.” 

Last month, the Ed. Department’s Inspector General’s Office issued a scathing report revealing the department’s student loan arm, the Office of Federal Student Aid (FSA), failed to properly oversee all nine student loan servicers that handle the accounts of over 42 million federal student loan borrowers. The audit directly contradicted the Trump administration’s arguments that borrowers receive excellent customer service and protection from substandard practices, stating the FSA is “not holding servicers accountable…[giving] the impression that it is not concerned with servicer noncompliance with Federal loan servicing requirements, including protecting borrowers’ rights.” The IG even went so far as to state that basic requirements for forbearances, deferments, and income-based repayment weren’t being relayed to borrowers in more than 61% of the FSA-reviewed cases. Allied Progress called for immediate hearings to investigate the reported abuses and potential fraud committed by student loan servicers like Navient and Nelnet.

WHAT YOU NEED TO KNOW:

The CFPB Was Negotiating A $1 Billion Settlement With Navient As A Result Of An Investigation In The Last Months Of The Obama Administration

The CFPB “Was Negotiating A Large Settlement” With Navient “In The Final Months Of President Obama’s Administration,” But The Talks Between The Two Entities “Broke Down” After Trump’s Election. “In the final months of President Obama’s administration, the government’s top consumer regulator was negotiating a large settlement with the student loan collector Navient, which it said had misled borrowers and made mistakes that added billions of dollars to their bills. But after President Trump’s victory, the talks between the company and the Consumer Financial Protection Bureau broke down. Two days before his inauguration, the bureau sued Navient, accusing it of ‘systematically and illegally failing borrowers at every stage of repayment.’ Two states, Illinois and Washington, simultaneously filed their own suits in state courts.” [Stacy Cowley, “How a Potential $1 Billion Student Loan Settlement Collapsed After Trump Won,” The New York Times, 10/07/18]

Before Donald Trump’s Inauguration, The CFPB Filed A Lawsuit Against Navient, Charging That The Loan Servicer Illegally Failed Borrowers “At Every Stage Of Repayment.”

In January 2017, The CFPB Sued Navient For “Illegally Failing Borrowers At Every Stage Of Repayment.” “[T]he Consumer Financial Protection Bureau (CFPB) is suing the nation’s largest servicer of both federal and private student loans for systematically and illegally failing borrowers at every stage of repayment. For years, Navient, formerly part of Sallie Mae, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans. The Bureau seeks to recover significant relief for the borrowers harmed by these illegal servicing failures.” [Press Release, Consumer Financial Protection Bureau, 01/18/17]

• The CFPB charged that Navient: “Fails to correctly apply or allocate borrower payments to their account”; “Steers struggling borrowers toward paying more than they have to on loan”; “Obscured information consumers needed to maintain their lower payments”; “Deceived private student loan borrowers about requirements to release their co-signer from the loan”; and “Harmed the credit of disabled borrowers, including severely injured veterans.” [Press Release, Consumer Financial Protection Bureau, 01/18/17]

The CFPB Found That Navient Steered Struggling Borrowers Into Repayment Plans That Resulted In Higher Interest And Fees, And Often Incorrectly Processed Payments, Resulting In Fees And Other Problems For Borrowers

The CFPB Alleged That Navient “Incentivized Employees To Encourage Borrowers To Postpone Payments Through Forbearance” Instead Of Enrolling “Them In An Income-Driven Repayment Plan,” Resulting In Increased Fees And Interest For Borrowers. “Among the most serious charges in the CFPB complaint is an allegation that Navient incentivized employees to encourage borrowers to postpone payments through forbearance, an option in which interest continues to accrue, rather than enroll them in an income-driven repayment plan that would avoid fees. As a result, the CFPB says Navient amassed $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances from January 2010 to March 2015.Furthermore, the bureau accuses Navient of misleading people about the terms of renewing enrollment in income-driven repayment plans that cap monthly bills to a percentage of earnings, and misreporting the loan discharge of disabled borrowers to the credit bureaus. The complaint also claims Navient’s subsidiary, debt collection agency Pioneer Credit Recovery, made illegal misrepresentations about the federal loan rehabilitation program available to defaulted borrowers.”[Danielle Douglas-Gabriel, “Student loan servicer Navient hit with three government lawsuits in one day,” The Washington Post, 01/18/17]

• The CFPB Also Alleged That Navient Often Incorrectly Processed Payments “Resulting In Late Fees, Interest Charges And Negative Reports Being Sent To Credit Reporting Agencies.” “Among the CFPB’s charges, Navient — formerly part of Sallie Mae —  allegedly steered struggling borrowers into forbearance when they might have qualified for income-driven repayment plans, and did not adequately keep borrowers in income-driven plans informed of critical deadlines to maintain their eligibility. Borrowers aiming to get ahead on their loans by making extra payments may also have been burned. The suit alleges Navient often processes such payments incorrectly, resulting in late fees, interest charges and negative reports being sent to credit reporting agencies.” [Kelli B. Grant, “America’s largest student loan company sued for misallocating student loan payments,”CNBC, 01/19/17]

From 2014 To 2016, Navient Was A Defendant In 530 Federal Lawsuits.

From 2014 To 2016, “Navient Was Named As A Defendant In 530 Federal Lawsuits.” “[In 2016], Navient received 23 complaints per 100,000 borrowers, more than twice that of the nearest competitor, according to Fusion’s analysis. And from January 2014 to December 2016, Navient was named as a defendant in 530 federal lawsuits. The vast majority were aimed at the company’s student loans servicing operations. (Nelnet and Great Lakes, the two other biggest companies in the student loans market, were sued 32 and 14 times over the same period, respectively.) Many of the complaints and lawsuits aimed at the company relate to its standard practice of auto-dialing borrowers to solicit payments.” [Daniel Rivero, “The debt trap: how the student loan industry betrays young Americans,” The Guardian, 09/06/17]

Navient Spun Off From Sallie Mae In 2014 And Began Servicing All Of The Company’s Existing Loans.

In 2014, Navient Spun Off From Sallie Mae, Which “Was Founded As A Government-Sponsored Enterprise In 1972 And Privatized In 2004.” “Navient was spun off as a separate loan servicing company by the SLM Corporation in 2014. SLM, widely known as Sallie Mae, was founded as a government-sponsored enterprise in 1972 and privatized in 2004.” [Gretchen Morgensen, “At Student Loan Giant Navient, Troubled Past Was Prologue”, New York Times, 01/21/17]

In 2014, The Department Of Justice Filed A Lawsuit Against Navient (formerly Sallie Mae), Alleging That The Company Violated The Servicemembers Civil Relief Act By Failing To Provide Military Members With The Required Six Percent Interest Rate Cap.

In May 2014, The Department Of Justice Filed A Lawsuit Against Navient (formerly Sallie Mae), Alleging That It Violated The Servicemembers Civil Relief Act (SCRA) “By Failing To Provide Members Of The Military The Six Percent Interest Rate Cap To Which They Were Entitled.” “The Department of Justice today announced the federal government’s first lawsuit filed against owners and servicers of student loans for violating the rights of servicemembers eligible for benefits and protections under the Servicemembers Civil Relief Act (SCRA).  The United States’ complaint alleges that three defendants, collectively known as Sallie Mae, engaged in a nationwide pattern or practice, dating as far back as 2005, of violating the SCRA by failing to provide members of the military the six percent interest rate cap to which they were entitled.  The three defendants are Sallie Mae Inc. (now known as Navient Solutions Inc.), SLM DE Corporation (now known as Navient DE Corporation), and Sallie Mae Bank.  The complaint further alleges that defendants Sallie Mae Inc. and SLM DE Corporation also violated the SCRA by improperly obtaining default judgments against servicemembers.” [Press Release, U.S. Department of Justice, 05/13/14]

The Justice Department Proposed A $60 Million Settlement That Would Compensate 60,000 Servicemembers.

The Justice Department Proposed A Settlement That Would “Require Sallie Mae [Now Navient] To Pay $60 Million To Compensate Servicemembers For The Alleged SCRA Violations.” “In addition to the complaint, the department filed a proposed settlement of the lawsuit which will require Sallie Mae to pay $60 million to compensate servicemembers for the alleged SCRA violations.  The department estimates that about 60,000 servicemembers will receive compensation under the settlement.  The settlement and complaint have been filed in the U.S. District Court for the District of Delaware and the settlement is pending approval in that court.” [Press Release, U.S. Department of Justice, 05/13/14]

• The Settlement Was Ultimately Paid By Navient. The following year, “The Department of Justice announced [that]… 77,795 service members will begin receiving $60 million in compensation for having been charged excess interest on their student loans by Navient Corp., the student loan servicer formerly part of Sallie Mae.” [Press Release, U.S. Department of Justice, 05/28/15]

Navient Claimed There Was “No Expectation That The Servicer Will ‘Act In The Interest Of The Consumer.’”

Navient Argued In A Court Filing That There Was “No Expectation That The Servicer Will ‘Act In The Interest Of The Consumer.’” “Among other things, the suits charged that the company saved itself money by steering borrowers away from affordable payment plans and toward options that cut company costs but were more expensive for borrowers. In a particularly striking admission, the company argued in its court filings last month that it had no responsibility to act as a ‘fiduciary counselor’ and that there was ‘no expectation that the servicer will “act in the interest of the consumer.”’” [Editorial Board, “The Wrong Move on Student Loans,” The New York Times, 04/06/17]

In 2010, Nelnet Agreed To Pay $55 Million To Settle A Lawsuit That Accused It Of Inflating Interest Rate Subsidies From The Department Of Education.

In 2010, Nelnet Agreed To Pay $55 Million “To Settle Its Share Of A Whistle-Blower Lawsuit” That Accused It And Other Lenders “Of Defrauding Taxpayers Of More Than A Billion Dollars In Student-Loan Subsidies.” “Nelnet will pay $55-million to settle its share of a whistle-blower lawsuit that accuses it and several other lenders of defrauding taxpayers of more than a billion dollars in student-loan subsidies. The settlement, which Nelnet announced late Friday, is the latest to result from a lawsuit brought by Jon H. Oberg, a former Education Department researcher, on behalf of the federal government. A federal judge ordered Nelnet and seven other student-loan companies to participate in a settlement conference last week after two of the other defendants in the case, Brazos Higher Education Service Corporation and Brazos Higher Education Authority, reached a tentative settlement agreement with Mr. Oberg. Among the other defendants in the case is Sallie Mae, the nation’s largest student-loan company.” [Kelly Field, “Nelnet to Pay $55-Million to Resolve Whistle-Blower Lawsuit,”The Chronicle of Higher Education, 08/15/10]

• The Department Of Justice “Provided Assistance At Many Stages Of The Case, Including During The Settlement Process.”“The settlements resolve allegations brought in a whistleblower action filed in the Eastern District of Virginia under the False Claims Act, which permits private citizens to bring lawsuits alleging violations of the Act on behalf of the United States and to share in any recovery. The whistleblower suit was filed by Dr. Jon Oberg, a former employee of the Department of Education, who alleged that several lenders participating in the federal student financial aid programs created billing systems that allowed them to receive improperly inflated interest rate subsidies from the Department of Education. The United States did not intervene in this action, which was litigated by the whistleblower, but it provided assistance at many stages of the case, including during the settlement process.” [Press Release, “Four Student Aid Lenders Settle False Claims Act Suit for Total of $57.75 Million,” U.S. Department of Justice, 11/17/10]

Whistleblower Jon Oberg Discovered That Companies Like Nelnet Were Making Hundreds Of Millions In Excess Profits By Passing New Loan Money Through Old Portfolios.

The Lawsuit Was Brought By Whistleblower Jon H. Oberg, A Former Education Department Researcher Who Discovered That Several Loan Companies “Had Devised A System To Essentially Pass New Loan Money Through Old Loan Portfolios,” “Thereby Making Hundreds Of Millions Of Dollars In Excess Profits.” “Back in 2003, a former university professor and congressional staff member named Jon H. Oberg was toiling away as a researcher at the U.S. Department of Education, nearing retirement, when he noticed something odd. Through a careful maneuver, Mr. Oberg realized, banks using federal money to issue loans to college students had devised a clever way to keep a lot more of that money than they were supposed to. It traced back to a system designed to help students during the economic troubles of the 1980s. In order to encourage banks to help those students, the government promised nonprofit lenders a fixed 9.5-percent rate of return on student loans. In a time of relatively high interest rates, that promise made some sense; in the 1990s, when the economy improved and rates fell, it turned into a financial windfall for lenders. So Congress voted to shut off that subsidy — with the exception of existing loans. But several loan companies, Mr. Oberg figured out, had devised a system to essentially pass new loan money through old loan portfolios that were eligible for the 9.5-percent repayment rate, thereby making hundreds of millions of dollars in excess profits. Mr. Oberg tried to warn officials in his department of the problem; he was told to find something else to work on. At that point, he became a whistle-blower. He has spent the last 10 years helping government lawyers prove the scheme in court, as they tried to hold nine loan companies responsible.” [Paul Basken, “After 10 Years in Court, a Student-Loan Whistle-Blower Fights His Last Battle,”The Chronicle of Higher Education, 12/05/17]

In August 2007, Nelnet Agreed To Pay $2 Million To Settle Charges That Nelnet Entered Into Improper Agreements With University Alumni Associations To Steer Borrowers Toward Their Loans.

In August 2007, Nelnet Agreed “To Pay $2 Million Into A Fund To Educate High School Students About Financing College” After The New York Attorney General Found “That Nelnet Had Entered Into Referral Agreements With Approximately 120 College And University Alumni Associations.” “One of the nation’s largest student loan companies, Nelnet, agreed yesterday to pay $2 million into a fund to educate high school students about financing college, settling an inquiry into its business practices by the New York attorney general.” [Jonathan D. Glater, “Lender Agrees to Contribution Of $2 Million to a Student Fund,” The New York Times, 08/01/07]

• “The Attorney General’s investigation revealed that Nelnet had entered into referral agreements with approximately 120 college and university alumni associations. Under many of these agreements Nelnet was granted use of the school’s logo for advertising purposes and also had their materials placed on college and university websites for distribution. In return, Nelnet paid alumni associations either an annual fee or payments for every loan consolidation application the association directed to them. Since these alumni associations stood to profit from recommending Nelnet loans, their advice to students and alumni was unfairly biased and not necessarily in the borrower’s best interest.” [Press Release, “Attorney General Cuomo Announces Settlement With Nation’s 2nd Largest Loan Consolidator,” New York State Attorney General, 07/31/07]

Nelnet Had Previously Agreed To Pay $1 Million To Similar Fund Following An Investigation By The Nebraska Attorney General. “But the Nebraska attorney general, citing the agreement, relieved Nelnet of its obligation to pay $1 million into a similar fund he had created. The company, which is based in Lincoln, Neb., was under intense public scrutiny this spring amid revelations of improprieties by student loan companies, and in April promised to pay into the Nebraska fund. The Nebraska attorney general, Jon Bruning, decided that Nelnet no longer had to pay into his fund because ‘it doesn’t make sense to create two funds for the same purpose,’ said Holley Hatt, a spokeswoman for Mr. Bruning.” [Jonathan D. Glater, “Lender Agrees to Contribution Of $2 Million to a Student Fund,” The New York Times, 08/01/07]

Nelnet Agreed To Stop Paying Alumni Associations To Market Its Loans And Stop Operating Call Centers On Behalf Of College Financial Aid Offices.

Under Its Agreement With New York, Nelnet “Agreed To Stop Paying University Alumni Associations To Market Loans To Their Members” And “Stop Operating Call Centers On Behalf Of College Financial Aid Offices.” “Under the New York agreement, Nelnet separately agreed to stop paying university alumni associations to market loans to their members, and to abide by a code of conduct that prohibits practices like giving a university money or other incentives in exchange for steering students to a particular lender. The company will also stop operating call centers on behalf of college financial aid offices — a practice that was criticized because call center staff members might be biased in their advice to students.” [Jonathan D. Glater, “Lender Agrees to Contribution Of $2 Million to a Student Fund,” The New York Times, 08/01/07]

Nelnet Is Currently Facing A Class Action Lawsuit Alleging That It Improperly Canceled Income-Based Repayment Plans Before Their Renewal Deadlines.

In June 2018, A Class-Action Lawsuit Against Nelnet Was Filed Alleging That The Servicer Canceled A Borrower’s “Income-Based Repayment Plan Before The Deadline To Renew It, Adding Thousands Of Dollars To Her Loan.” “An Oregon woman is suing Nelnet in federal court, saying the student loan-servicing company canceled her income-based repayment plan before the deadline to renew it, adding thousands of dollars to her loan. It’s a ‘common and pervasive practice’ by Nelnet employees to boost revenues from income-strapped borrowers, and the U.S. Department of Education, which backs the loans, said Omaha attorney Dave Domina, who filed the class-action lawsuit June 8. Domina said there are thousands, ‘if not millions,’ of borrowers like Jessica Olsen, who applied for an income-based repayment plan from Nelnet in 2014 and, because of her low income, was not required to make monthly payments.” [Chris Dunker, “Class-action lawsuit alleges Nelnet improperly canceled income-driven repayment plans,”Lincoln Journal Star, 06/14/18]

• The Complaint Noted That Nelnet Had “A Financial Incentive To Maintain Or Increase The Number Of Borrowers In Their Portfolios […] While Also Minimizing The Number Of Borrowers Who Successfully Discharge Their Loans.” “Student loan-servicing companies have a financial incentive to maintain or increase the number of borrowers in their portfolios, the complaint says, while also minimizing the number of borrowers who successfully discharge their loans.” [Chris Dunker, “Class-action lawsuit alleges Nelnet improperly canceled income-driven repayment plans,”Lincoln Journal Star, 06/14/18]

FedLoan Is Facing A Bundle Of Class-Action Lawsuits Brought By Tens Of Thousands Of Borrowers Who Have Been Saddled With Additional Debt Because The Servicer Failed To Properly Process Payments.

FedLoan Currently Is Facing Ten Class-Action Lawsuits That Have Been Bundled In Federal Court In Philadelphia Brought By Tens Of Thousands Of Borrowers Who “Have Been Saddled With Additional Debt Because PHEAA Cannot Or Will Not Properly Process Their Payments.” “Today, [University of Pittsburgh Law graduate Arianne Gallagher]is a plaintiff in one of 10 class-action lawsuits filed against the Pennsylvania Higher Education Assistance Agency that have been bundled in federal court in Philadelphia. The plaintiffs — borrowers from 10 states — say they represent tens of thousands who have been saddled with additional debt because PHEAA cannot or will not properly process their payments.The agency, which conducts its federal loan business as FedLoan Servicing, does not comment on pending litigation, spokesman Keith New said. But he maintains PHEAA is living up to the terms of its contracts with the U.S. Department of Education. The federal agency hired PHEAA to process payments on 7.6 million student loans, which represents about a quarter of the $1.3 trillion in federal student loan debt owed by 44 million Americans.”[Deb Erdley, “Federal class-action lawsuits target practices of Pennsylvania-based student loan agency,” Pittsburgh Tribune-Review, 09/01/18]

Fedloan Was Sued In Massachusetts For Allegedly Preventing “Borrowers From Making Qualifying Monthly Payments That Count Toward Loan Forgiveness” And Also For Overcharging Students. In 2017, “Massachusetts Attorney General Maura Healey filed the lawsuit against Pennsylvania Higher Education Assistance Agency, which manages over a fourth of the nation’s $1.4 trillion student loan debt on behalf of various lenders. The complaint, filed in Suffolk County Superior Court, claimed PHEAA caused teachers and other public servants to lose benefits and financial assistance under two federal programs.”[Nate Raymond, “Massachusetts accuses PHEAA of unfair student loan servicing practices,” Reuters, 08/23/17]

• “According to Healey’s lawsuit, PHEAA has prevented borrowers from making qualifying monthly payments that count toward loan forgiveness and also overcharged students.” [Nate Raymond, “Massachusetts accuses PHEAA of unfair student loan servicing practices,” Reuters, 08/23/17]

FedLoan Has The Highest Rates Of Delinquent Borrowers And Defaulted Loans Of All Federal Loan Servicers.

According To FTC Commissioner Rohit Chopra, PHEAA “Had The Lowest Percentage Of Borrowers In Current Repayment Status, The Highest Percentage Of Those Considered Severely Delinquent And Highest Percentage Who Had Defaulted” At The End Of 2017. “Rohit Chopra, a U.S. Federal Trade commissioner and former student loan ombudsman for the federal Consumer Financial Protection Bureau, analyzed the numbers and said they bear ‘an uncanny resemblance’ to problems in the mortgage servicing market that set off the recession a decade ago. ‘The default rates on student loans are alarmingly high,’ Chopra said. ‘And there are some serious questions about how student loan servicers might be responsible for many of these defaults. Importantly, in the federal student loan program it is easy to avoid default if you get the right information because all borrowers are entitled to repay their loans based on income.’ Chopra said PHEAA, the nation’s second-largest student loan servicer, at the end of last year had the lowest percentage of borrowers in current repayment status, the highest percentage of those considered severely delinquent and highest percentage who had defaulted.” [Deb Erdley, “Federal class-action lawsuits target practices of Pennsylvania-based student loan agency,”Pittsburgh Tribune-Review, 09/01/18]

FedLoan Is The Only Servicer That Managers Loans By Borrowers Pursuing Public Service Loan Forgiveness

FedLoan “Is The Only Servicer Designated By The Education Department To Manage Loans Held By Borrowers Pursuing Public Service Loan Forgiveness.” “FedLoan, an arm of Pennsylvania Higher Education Assistance, is the only servicer designated by the Education Department to manage loans held by borrowers pursuing Public Service Loan Forgiveness.” [Danielle Douglas-Gabriel, “Watchdog agency blasts government contractor for mishandling student loan forgiveness program,” The Washington Post, 06/22/17]

• The Department Of Education Manages The PSLF Program And Contracts With A Single Loan Servicer—FedLoan—“To Handle Day-To-Day Activities Associated With The Program,” Including Making Determinations About Whether Employment And Loans Qualify For PSLF. “The Department of Education (Education) manages the PSLF program and contracts with a single loan servicer to handle day-to-day activities associated with the program, which include responding to borrower inquiries, making preliminary determinations about whether borrowers’ employment and loans qualify for PSLF, and processing loan forgiveness applications.” [“Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers,” U.S. Government Accountability Office, 09/05/18]

The First Borrowers Were Eligible To Apply For Loan Forgiveness Under The PSLF Program In September 2017.

The First Borrowers Began Applying For Loan Forgiveness In September 2017, Ten Years After The PSLF Program Was Established. “Starting in September 2017, borrowers began applying to have their federal student loans forgiven through the Public Service Loan Forgiveness (PSLF) program. This program, established by law in 2007, is intended to encourage individuals to enter and continue careers in public service by forgiving borrowers’ remaining federal student loan balances after they have made at least 10 years of loan payments while working in public service and meeting other requirements.” [“Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers,” U.S. Government Accountability Office, 09/05/18]

Data From The Department Of Education Showed That 99 Percent Of Applications For Loan Forgiveness Under The Program Have Been Denied.

“Recent Data From The Department Of Education Show That 99 Percent Of Applications For Loan Forgiveness Have Been Denied.” “But recent data from the Department of Education show that 99 percentof applications for loan forgiveness have been denied. The pitch may have been simple, but the execution was anything but.” [Cory Turner, “Why Public Service Loan Forgiveness Is So Unforgiving,” NPR, 10/17/18]

In The First Eight Months Since Borrowers Became Eligible To Apply, The Department Of Education Approved 55 Borrowers For Loan Forgiveness Under The PSLF Program – Out Of 19,300 Applications.

The Government Accountability Office (GAO) Found That, Out Of The 19,300 Applications Submitted By Borrowers Between September 2017 And April 2018, Only 55 Borrowers Were Approved For Loan Forgiveness. “In the first 8 months that borrowers were able to apply for loan forgiveness (September 2017 through April 2018), Education had approved 55 borrowers and forgiven a total of almost $3.2 million in outstanding student loan balances, an average of almost $58,000 per borrower. The amount of loan forgiveness for individual borrowers ranged from almost $800 to almost $290,000. Over 19,300 borrowers had submitted loan forgiveness applications as of April 2018.” [“Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers,” U.S. Government Accountability Office, 09/05/18]

Some Borrowers With Qualifying Loans And Employment Were Denied For Missing Information On Their Applications Or Not Making Enough Qualifying Payments

Most Borrowers With Qualifying Loans And Employment “Were Denied Because They Had Not Yet Made 120 Qualifying Payments” Or Because They Were “Missing Information On The Application.” “Of the almost 17,000 borrowers with applications that had been processed, over 40 percent had qualifying loans and employment but were denied because they had not yet made 120 qualifying payments. The other most common reasons borrowers were denied included missing information on the application or because the borrower did not have qualifying federal loans. Education officials estimated that about 700 borrowers will be approved for loan forgiveness by September 30, 2018.” [“Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers,” U.S. Government Accountability Office, 09/05/18]

Consumers Have Filed 88 Complaints About GSMR With The CFPB.

There Are 88 Complaints About Granite State Management & Resources In The CFPB’s Consumer Complaint Database.[Consumer Complaint Database, Consumer Financial Protection Bureau, accessed 11/02/18]

Borrowers Have Complained That GSMR Delayed Processing Their Deferment Applications

GSMR Borrowers Have “Complained About How Long It Took Them To Process A Deferment Application,” Which “Can Lead To Missed Payments” And Affect Credit Scores. “The typical complaint about deferment is that servicers suggest deferment instead of longer-term solutions when borrowers cannot make their payments. GSM&R borrowers, on the other hand, complained about how long it took them to process a deferment application. Delays can lead to missed payments and a hit to a borrower’s credit score. Some borrowers who were starting school applied for in-school deferment but found out that their deferment wasn’t going to last as long as they needed. GSM&R blamed changing information about how long the student would be enrolled, though the borrower had submitted the correct information from the beginning.” [Katie Brazis, “Problems with Granite State Management and Resources,” The College Investor, 09/16/18]

Borrowers Reported That GSMR Erroneously Told TransUnion That 90,000 Borrowers Had Filed For Bankruptcy And Could Not Pay Their Student Loans—Temporarily Tanking Their Credit Scores

According To Borrower Complaints, GSMR Erroneously Reported To TransUnion That 90,000 Borrowers Had Filed For Bankruptcy And Could Not Pay Their Loans, Temporarily But Seriously Affecting Borrowers’ Credit Scores. “In a particularly bad case, GSM&R reported to TransUnion that about 90,000 borrowers, according to someone who submitted a complaint on BBB, had filed for bankruptcy and that they could not pay their student loans. Borrowers began discovering the issue when their credit monitoring services notified them of a credit score drop of up to 100 points. These borrowers were often in good standing before the error. GSM&R did not reach out to any affected borrowers. It appears they hoped to fix the error without anyone noticing. When borrowers called in about this error, representatives could do nothing to help them, but assured them it would be resolved in a few days and told them to continue to monitor their credit. However, the issue was not always resolved quickly and affected more than some borrowers’ credit scores. In one case, this error prevented a borrower from purchasing property because his credit score dropped almost 100 points. GSM&R worked with TransUnion to fix the credit report, but the borrower requested to be compensated for his loss of purchasing power and time resulting from their mistake. It’s unclear if GSM&R granted his request.” [Katie Brazis, “Problems with Granite State Management and Resources,” The College Investor, 09/16/18]

Borrowers Have Complained About EdFinancial With The Consumer Financial Protection Bureau (CFPB) And The Better Business Bureau

Consumer Complaints About EdFinancial “That Have Been Posted Publicly On The Consumer Financial Protection Bureau Website, The Better Business Bureau Website, And Other Places Around The Web.” “EdFinancial has its fair share of consumer complaints that have been posted publicly on the Consumer Financial Protection Bureau website, the Better Business Bureau website, and other places around the web. However, while the responses to complaints are not visible on some sites, EdFinancial does seem more responsive to these public complaints than other servicers.” [Natalie Korman, “Problems with Edfinancial Loan Servicing,” The College Investor, 09/16/18]

Consumers Have Filed 198 Complaints Against EdFinancial Services With The CFPB.

There Are 198 Complaints Against EdFinancial Services Filed In The CFPB Complaint Database. [Consumer Complaint Database, Consumer Financial Protection Bureau, accessed 11/02/18]

Among Other Issues, Borrowers Have Complained About EdFinancial Falsely Reporting Loans As Delinquent To Credit Bureaus And Failing To Process Income-Based Repayment Plan Applications In A Timely Manner.

Among Other Issues, Borrowers Have Complained About EdFinancial Falsely Reporting Loans As Delinquent To Credit Bureaus And Failing To Process Income-Based Repayment Plan Applications In A Timely Manner. Borrower complaints about EdFinancial include falsely reporting loans as delinquent to credit bureaus, slow processing of income-based repayment (IBR) plan applications, excessive phone calls (such as calls to an ex-spouse with no involvement in the debt), and misapplication of loan payments. [Natalie Korman, “Problems with Edfinancial Loan Servicing,” The College Investor, 09/16/18]

MOHELA Raised Monthly Payments And/Or Raised Interest Rates As The Department Of Education Transferred 500,000 Accounts To Its Portfolio

After ED Transferred Half-A-Million Borrowers To MOHELA, Several Of Them Complained About Unexpectedly Higher Fees.“Several student loan borrowers say they were hit with higher payments and fees after their loan balances were transferred to another servicer, they say, without warning.Roughly 500,000 student loans owned by the United States Department of Education were recently transferred to Missouri-based Mohela.” [Lisa Parker, “Student Loan Borrowers Say They’re Being Gouged,” NBC 5 Chicago, 02/28/13]

• One Borrower Complained That After His Balance Was Transferred To MOHELA, His Monthly Payment Increased By 74%.“It said that the monthly payment amount, the monthly installment, was $331, and that was 74 percent higher than my payment amount with Direct Loan Servicing. I was really upset.” The borrower “was unable to reach anyone in customer service at Mohela who could give him a cogent explanation of why his amounts due were so much higher than just the previous month.” [Lisa Parker, “Student Loan Borrowers Say They’re Being Gouged,” NBC 5 Chicago, 02/28/13]
• Another Borrower Complained That Although Her Monthly Payments Went Down, MOHELA Raised Her Interest Rate. “Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 — roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted. A Mohela representative declined to comment on specific borrower situations but said that the company is working hard to minimize disruption and to resolve issues as they arise.” [Marian Wang, “Student Loan Borrowers Dazed and Confused by Servicer Shuffle,” ProPublica, 04/23/12]

A Lawyer Argued MOHELA “Did Not Have The Right” To Alter Borrowers’ Loans So Dramatically

A Lawyer Argued That MOHELA “Did Not Have The Right To Impose Fees, Costs, And Charges All At Once […]” “Chicago attorney David Leibowitz reviewed Rami’s paperwork. Leibowitz, who handles a range of financial issues in his practice, said he saw red flags right away. ‘It would seem Mohela did not have the right to impose fees, costs, and charges all at once, and even if they did have the right to impose fees, costs and charges all at once they’re having done so without being transparent,” Leibowitz said. “Having done so without an explanation, it’s questionable. It would not seem to be proper servicing procedures, and the fact he is speaking with several customer service representatives that don’t know anything? That’s not particularly good, either.’“ [Lisa Parker, “Student Loan Borrowers Say They’re Being Gouged,” NBC 5 Chicago, 02/28/13]

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