PHEAA will automatically review the accounts of over 10,000 New York borrowers,
Providing corrections and financial assistance after years of alleged mismanagement

AG James continues efforts to help students burdened by student debt crisis

NEW YORK – New York Attorney General Letitia James today secured student debt relief for thousands of New York borrowers whose federal loans were allegedly mismanaged by the Pennsylvania Higher Education Assistance Agency (PHEAA) . Under an agreement with the Office of the Attorney General (OAG), PHEAA is required to audit thousands of accounts to identify errors that may have caused borrowers to miss benefits, such as based repayment plans. Income Relief (IDR) or Debt Cancellation for eligible borrowers under the Public Service Loan Forgiveness Program (PSLF). PHEAA, which operates as FedLoan Servicing and American Education Services (AES), will correct errors identified in borrowers’ accounts and provide monetary relief as restitution to certain borrowers, where appropriate. Over 300,000 borrowers can have their accounts reviewed for free and are encouraged to request an audit. This agreement resolves an earlier lawsuit brought against the student loan servicer for allegations that it failed to properly manage student loans and administer the PSLF program by inaccurately counting loan payments, wrongly denying applications and by not processing applications in a timely manner.

“Negligent student loan servicers like PHEAA have left countless students in debt and contributed to the national student debt crisis,” said Attorney General James. “As one of the largest student loan managers in the country, it is a shame that PHEAA has not done more to help students and made officials miss loan cancellations. Today’s agreement will correct years of mismanagement by PHEAA and put borrowers on the path to finally being debt free. We all need to do our part to tackle the student debt crisis, and that means holding negligent student loan servicers accountable for their role in creating it.

Under the agreement, PHEAA will automatically review the accounts of nearly 10,000 New York borrowers for potential errors. PHEAA will review accounts for various errors including incorrect information provided on PSLF or IDR eligibility, inaccurate monthly payments charged to borrowers, etc. A complete list of errors that will be corrected can be found on the OAG’s Frequently Asked Questions page. If the review shows errors have been made, PHEAA will ensure that the borrower receives credit for all payments by adjusting accounts appropriately or provide comparable monetary relief.

In addition, more than 300,000 current New York residents with an active Direct Loan or Federal Family Education Loan (FFEL) that is currently serviced by PHEAA or was serviced by PHEAA as of December 1, 2021 may be eligible for review. their accounts at no cost to borrowers. A full description of eligible borrowers can be found on the OAG’s Frequently Asked Questions page.

Under the agreement, PHEAA will begin sending notices to borrowers within 30 days, and all notices will be sent within 90 days. Notices will arrive using the method PHEAA normally uses to communicate with borrowers and will provide instructions on how to request a review. Borrowers can also request a review by accessing their online account at

If you are a PHEAA borrower and do not receive a notice but believe you are entitled to an account review, you should contact PHEAA by calling 1-800-699-2908 (for FedLoan borrowers) and 1-800-233-0557 (for AES borrowers).

If PHEAA finds no errors during the automatic review or as a result of a requested review, borrowers will have the opportunity to appeal this decision at no cost to them. The OAG will receive regular reports on the review and appeals process to ensure it is working properly and may also intervene on behalf of borrowers, if necessary, if they appeal the PHEAA decision.

Today’s agreement also extends the benefits offered by the U.S. Department of Education’s PSLF temporary waiver program adopted in October 2021 to help borrowers who may not have been able to use the waiver due to mismanagement of the PHEAA. Under the new temporary rules, the waiver program will count payments on FFEL, Perkins, or other non-direct federal loans as eligible for the 120-payment PSLF requirement for loan forgiveness. Additionally, some loan payments that are late, less than the total amount due, or made on the wrong payment plan will also be considered. Borrowers who are eligible for these benefits should check their account status with Federal Student Aid and contact them with any questions. The PHEAA exam under its agreement with the OAG is separate from the United States Department of Education exam.

This agreement continues Attorney General James’ longstanding commitment to solving the national student debt crisis. Last month, Attorney General James urged former DeVry students who were deceived by the university to apply for federal loan releases and OAG previously recovered more than $2.25 million for students who were defrauded. by DeVry. In January 2022, Attorney General James secured more than $110 million in debt relief for thousands of New York students deceived by the student loan service, Navient. In May 2021, Attorney General James sent a letter to the U.S. Secretary of Education calling for significant reforms to help student borrowers and protect them from predatory for-profit colleges.

Although PHEAA has announced that it will stop serving federal student loans when its current contract with the US Department of Education ends in December 2022, it has committed to taking the necessary steps to complete the exams. automatic and discretionary under the agreement. This includes borrowers whose accounts have already been or will be transferred to new managers, including MOHELA, Aidvantage, Edfinancial or Nelnet, prior to the completion of the PHEAA review.

This case was handled by Assistant Attorneys General Hailey DeKraker and Christopher L. Filburn, under the supervision of Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia, with assistance from Data Scientist Chansoo Song and former Chief Data Analyst Chris Nelson under the supervision of Deputy Director of Research and Analytics Megan Thorsfeldt and Director Jonathan Werberg. The Consumer Frauds and Protection Bureau is part of the Economic Justice Division, which is headed by Chief Deputy Attorney General Chris D’Angelo and overseen by Senior Deputy Attorney General Jennifer Levy.

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