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- The Pennsylvania Higher Education Assistance Agency, a major student-loan servicer, is shutting down in December.
- Elizabeth Warren has long criticized the company for failing to provide debt relief to borrowers.
- The company administers PSLF, which denies 98% of public service workers who seek debt forgiveness.
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A company that handles 8.5 million Americans' student loans is shutting down after lawmakers like Elizabeth Warren accused it of misleading borrowers, lying to Congress, and failing to properly issue loan forgiveness.
The Pennsylvania Higher Education Assistance Agency (PHEAA) notified the Education Department on Thursday that it will not extend its 12-year-old federal contract beyond December 14 of this year, as first reported by Politico.
Borrowers who have applied for forgiveness in exchange for years of working as a teacher, in a nonprofit, or other public interest jobs might know PHEAA for its administration of the Public Service Loan Forgiveness (PSLF) program. The program forgives student debt for public servants after 120 monthly qualifying payments, and it currently has a 98% denial rate.
"Millions of loan borrowers can breathe a sigh of relief today knowing that their loans will no longer be managed by PHEAA, an organization that has robbed untold numbers of public servants of debt relief and was recently caught lying to Congress about its atrocious record of fines and penalties," Warren said in a statement.
The lie, she claims, happened in an April hearing in which Warren and ranking member of the Senate economic policy subcommittee John Kennedy asked CEOs of all the student-loan servicers in the country to testify on the impact of student debt on borrowers. PHEAA CEO James claimed that the company had never been penalized for mismanagement of PSLF.
Two weeks ago, however, Warren and Kennedy sent a letter to Steeley regarding "what appear to be false and misleading" statements and citing nine Education Department reviews in their letter that suggested the company's mismanagement of the program had resulted in corrective action plans and two fines, each more than $100,000.
"It is not clear how or why you provided information that appears to be inaccurate," Warren and Kennedy wrote.
She added that PHEAA should be responsible for a "swift and orderly transition" for borrowers to a new servicer. The Education Department has not yet commented on how this will impact borrowers under PHEAA.
The company's upcoming closure could suggest further hurdles the Education Department will encounter should they choose to restart payments on student loans in October. Warren warned the department last month of the "disastrous" impact restarting payments could have if servicers do not properly prepare borrowers, and she later requested that the payment pause be extended through next year.
She even held up the confirmation of an Education Department nominee to push for the better administration of student-loan servicers.
The Biden administration has begun the process of implementing reforms for PSLF, but it could take over a year for improvements to go into effect, and Democrats want Biden to act quicker to give borrowers needed relief.
A group of Democrats wrote last week: "As part of the upcoming negotiated rulemaking process, we encourage the Department to pursue policies that reduce disparities in the burden of student debt, simplify loan repayment, close donut holes in forgiveness programs, and improve the overall confidence of borrowers in the federal student loan system."