Student loan servicer that runs federal Public Service Loan Forgiveness program agrees to comply with state consumer protection laws

Sept. 28, 2021 (DENVER)—Attorney General Phil Weiser today announced that the student loan servicer that handles the federal Public Service Loan Forgiveness program, Pennsylvania Higher Education Assistance Agency, agreed to comply with a state law requiring consumer protection oversight after Colorado sued the servicer in May.

PHEAA, which does business as FedLoan Servicing and AES, is the exclusive servicer for the PSLF program that Congress created in 2007 to encourage graduates to work in public service. Under the administration of PHEAA, implementation of the program has been beset with problems, including extremely low approval rates for forgiveness and misinformation about whether borrowers were in the right kind of repayment plan or had the right kind of loans.

“Colorado student loan borrowers entitled to public service loan forgiveness, including public servants such as police officers, teachers, and many front-line workers, deserve the protections of Colorado law,” said Weiser. “This settlement ensures that PHEAA will comply with the law and my department can conduct the necessary oversight to stand up for student loan borrowers.”

In 2019, the state legislature authorized the Colorado Department of Law to license student loan servicers and ensure their compliance with consumer protections. PHEAA obtained a Colorado license. The department then requested records related to PHEAA’s handling of the PSLF program during the COVID-19 pandemic. When PHEAA initially refused to produce documents, the department sued to ensure that PHEAA comply with the attorney general’s oversight authority. Under the agreement announced today, PHEAA will produce records to the department in compliance with Colorado law.

On July 8, 2021, PHEAA announced that it will not accept an extension of its contract to service federally owned loans, including the PSLF program, and the company will transfer the federally owned loans to a different servicer.

The Colorado Student Loan Servicers Act also created a student loan ombudsperson in the Department of Law as a resource for student loan borrowers throughout the state. The ombudsperson is responsible for receiving, reviewing, and attempting to resolve complaints from student loan borrowers. Borrowers struggling with their student loans can click here to file a complaint with the student loan ombudsperson.

Student loan borrowers can click here to learn more about the requirements of the PSLF program.

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Media Contact
Lawrence Pacheco
Director of Communications
(720) 508-6553 office | (720) 245-4689 cell
Lawrence.pacheco@coag.gov

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PHEAA Assurance of Discontinuance

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