© 2023 Cincinnati Public Radio
Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

23 Senators Demand Investigation Into Mismanagement Of Student Loan Program

Updated at 4:20 p.m. ET

Twenty-three U.S. senators are calling on the nation's top consumer protection agency to investigate a loan servicer for its role in a troubled student loan forgiveness program. The program is designed to help public service workers like teachers and police officers.

The loan servicer, the Pennsylvania Higher Education Assistance Agency, better known as FedLoan and PHEAA, is one of the entities that handles the Public Service Loan Forgiveness Program.

"For several years now, government watchdogs have repeatedly found that PHEAA's missteps, errors, and mismanagement of the PSLF program caused public service workers to be denied the loan forgiveness that they had earned," the senators said in a letter to Kathleen Kraninger, director of the Consumer Financial Protection Bureau.

The senators, all Democrats, include Sherrod Brown, Amy Klobuchar, Bernie Sanders and Elizabeth Warren. The letter was obtained by NPR.

"Public service workers and their families need immediate protection from ongoing harm," the senators wrote. "We therefore ask that the CFPB do its job and immediately open an enforcement investigation into PHEAA's servicing practices, management of the PSLF program, and other potential violations of federal consumer financial laws."

The Public Service Loan Forgiveness Program aims to help police, military service members, teachers, people who work at nonprofits and others. If they make qualifying payments for 10 years, the program promises to forgive the remainder of their student loan debt.

But, as NPR has reported, the program is rejecting 99% of people who think they have done that when they apply to get their loans forgiven.

Sen. Brown of Ohio told NPR in an interview Tuesday that there are "far too many people who expected to be part of this loan forgiveness and they find out in their eighth or ninth year that they're not eligible, and that's just outrageous."

The CFPB did not immediately respond to a request for comment about the senators calling for the investigation. In a statement, the loan servicer said it is committed to compliance and regulatory requirements. "PHEAA has a long history of cooperating with the CFPB and consistently responds to inquiries to the fullest extent permitted by federal law and governing regulations," it said.

In their letter, the senators cited a 2017 report by the CFPB's student loan ombudsman. The report found that public service workers had been denied for loan forgiveness because of PHEAA's "flawed payment processing, botched paperwork and inaccurate information," the senators wrote.

And a 2018 Government Accountability Office report "found that public service workers had improperly been denied loan forgiveness because of PHEAA' s inability to properly account for qualifying payments and reliance on inaccurate information," the senators wrote.

Earlier this month, senators pressed Kraninger in a hearing after NPR reported that the CFPB sent examiners into loan servicing companies but that the effort was blocked by the Trump administration's Department of Education. The department essentially told servicers not to cooperate and provide the examiners with information. Senators told Kraninger she should use the power of her consumer protection agency to force the companies to comply.

In a statement, the Department of Education said it "takes its responsibility to provide high-quality service to federal student loan borrowers very seriously." It added that the high denial rates in the Public Service Loan Forgiveness are "by Congressional design, not by accident or failed implementation by the Department." And the department noted that it has created a help tool for borrowers and has increased its outreach to them.

Copyright 2021 NPR. To see more, visit https://www.npr.org.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.