Massachusetts Attorney General Maura Healey, seen here speaking at the City Year Boston summit in 2016.
The office of the Massachusetts Attorney General is reportedly threatening to the Pennsylvania Higher Education Assistance Agency (PHEAA), a student loan agency, over the handling of federal student loans.
According to The Morning Call, Massachusetts AG Maura Healey sent the PHEAA a letter to inform officials that the student loan agency is at the center of an investigation and possible lawsuit. State Representative Mike Peifer (R-Pike), the chairman of the PHEAA board, confirmed the existence of the letter and said it dealt with consumer protection issues revolving around federal student loans.
Peifer was advised by the PHEAA’s lawyer to not make the letter public because of the legal sensitivity surrounding the issue. The accusations are focused on issues related to the PHEAA’s handling of federal student loan contracting services. The student loan agency is attempting to figure out how money Attorney General Healey is claiming to be owed.
Peifer cited the massiveness of the PHEAA and the volume of loans they manage that come from various federal programs and commercial banks as reasons why errors could have occurred.
“We have 350 auditors, and we are constantly dealing with changes [in federal rules] and corrections,” Peifer said. “We are not trying to rip off anyone. At the end of the day there are no corporate shareholders looking at dividends. We look at ourselves as a state agency trying to fund higher education for students in the commonwealth.”
Jillian Fennimore, the communications director for Attorney General Healey, neither confirmed nor denied the investigation.
A lawsuit has yet to be filed with the Suffolk County Superior Court in Boston, the institution that would be dealing with this issue.
Created in 1963, the PHEAA aims to provide educational grants through taxpayer funds. The grants are intended to go to those Pennsylvanians that are trying to attend an undergraduate university, or a trade and business school. The agency is one of the largest student loan servicers in the entire country and handles more than $392 billion in student loans. The PHEAA deals with student loans issued by themselves, the U.S. Department of Education, private banks, nonprofit organizations, and colleges or universities.
For the 2016/17 financial year, $321.3 million in taxpayer money was used to find various grants and scholarships that are handled by the PHEAA. Another $103 million was generated from the agency’s own coffers to bring the total near $425 million. The grants are to be used on Pennsylvania students who fit into specific financial aid brackets, but can also be used for certain colleges in Massachusetts, Delaware, Ohio, Vermont, West Virginia, and Washington D.C.
PHEAA also handles major federal grants such as Pell Grants, Federal Supplemental Educational Opportunity Grants, and the TEACH Grant Program. American Education Services and FedLoan Servicing are the two corporate units of PHEAA.
This is not the first time that a student loan servicer or student loan company is under investigation or dealing with legal troubles. Navient was recently embroiled in lawsuit troubles spurred on by the CFPB. Such troubles are no surprise either considering that total student debt in the U.S. continues to rise. It is easy to surmise that the probability of suspicious behavior increases.
The Student Loan Report recently reported that the New Jersey Attorney General and the New Jersey Division of Consumer Affairs came to a settlement with a for-profit company that was offering student loan consolidation services to New Jersey borrowers without the necessary license.
Or, there was the instance when the consumer watchdog organization known as the Consumer Financial Protection Bureau (CFPB) took the company Student Loan Processing .US to court over allegations that the company was charging borrowers for services that could have been done for free through the government. In that case, a judge ordered the company to be shut down in the next 45 days and to reimburse student borrowers who were scammed out of their money by the fraudulent company.
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