Student Loan Servicer Accused of Mismanaging Debt Forgiveness Program

August 29, 2017 Posted by kingcade

According to a lawsuit filed by the attorney general of Massachusetts, one of the country’s biggest servicers of federal student loans has mismanaged its debt forgiveness program, raising repayment costs for hundreds of thousands of borrowers who work in public service jobs.

The loan servicer, FedLoan, has made numerous errors, potentially keeping many students in debt far longer than they expected, according to Maura Healey, the Massachusetts attorney general.

The company’s actions have jeopardized the financial futures of teachers and public servants nationwide. Consumer watchdogs and government officials have raised concern with the government’s public service loan forgiveness program, which promises qualifying workers — including teachers, librarians, police officers and doctors and nurses — forgiveness of their remaining federal student loans in return for a decade of full-time service.

Approximately 612,000 borrowers have signed up for the loan forgiveness program and submitted at least one approved certification, according to data from the Education Department.  However, many of the borrowers are concerned about how many of their monthly payments will be counted — or even if the certification itself will be revoked.

The Education Department said that the approval notices the company sends to borrowers seeking certification are not binding and can be rescinded by the department at any time. Four of those borrowers whose approvals were withdrawn are in continuing litigation with the department.  The Education Department says their student loan debt forgiveness was in error.

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