Senators Elizabeth Warren (Massachusetts) and John F. Kennedy (R-LA) wrote to the CEO of Key Student Loan Services about “what seems to be false and misleading.” testimony in Congress April 13, Yahoo Finance found out.
“We are writing to receive information about what appears to be false and misleading evidence that you gave at your hearing at the Subcommittee on Economic Policy of the Committee on Banking, Housing and Urban Affairs on April 13, 2021,” they wrote.
On Wednesday night, Warren, the committee chairman, and Kennedy, a senior member, sent a letter to Pennsylvania Higher Education Support Agency (PHEAA) CEO James Styles.
“This is a serious question,” the senators stressed. “Our hearing was held in part to understand the role of student loan providers and the extent to which they are responsible for the countless failures of the student loan program. But it looks like you were unable to provide accurate information about your company, which undermines the role of the fact-finding subcommittee and the possibility of misleading committee members and the public. ”
Warren and Kennedy are asking Styles to respond to their letter by July 7 and are planning a further hearing on the matter.
PHEAA manages Public Service Loan Forgiveness Program (PSLF)which works like FedLoan Servicing. During his April testimony, Styles stated that he did not believe the Department of Education (ED) fined or fined the company for serving it.
Senators pointed to a May 10 letter from the Federal Student Service ED, which said that since 2016, the federal government has actually discovered nine problems with the way PHEAA manages the PSLF program, issued four corrective action plans and two large fines.
“This new information provided by … the Department of Education shows that nine Department reviews conducted since 2016 have identified problems with the implementation of the PHEAA program,” resulting in numerous fines and corrective action plans, senators said.
They added that if the testimony was false “knowingly and intentionally”, then it entailed a fine and a criminal case. The letter added that an additional hearing will also be held on this matter.
“PHEAA respects the interest of the Senate Subcommittee in ensuring the submission of truthful and accurate testimony, but strongly denies that the testimony presented by the PHEAA CEO was anything other than a truthful and bona fide effort to answer the multipart questions asked by Senator Warren at Hearing 13 April, “a PHEAA spokesman told Yahoo Finance in a statement.” PHEAA will respond to the letter accordingly, but will not engage in further public debate through the media. “
PSLF has a dismal approval rating
Designed by Congress to help government officials – from teachers to firefighters – the PSLF program was the main problem the federal government has been grappling with for years…
The PSLF program allows government and nonprofit employees who have federal-backed student loans to petition for forgiveness after confirming 120 monthly payments under the applicable repayment plan.
Bounce rates for the PSLF program were high: Latest data found that of over 390,000 PSLFs filed between November 2020 and April this year, only 3,458 met PSLF requirements – 2.1%.
The data also showed that as of April 30, only about 5,500 loans had been repaid through the PSLF.
While over 175,000 active duty members with federal loans are eligible for PSLF, only 124 members have been approved, a last report found…
An “ inexplicable ” contradiction
During April hearingsWarren asked PHEAA Styles to confirm that based on audits conducted by ED since 2016, PHEAA’s automated system has generated “errors” and “mistakenly disqualifies[d] payments “.
“I don’t believe this is right,” Styles replied, adding that he was not familiar with audits.
Later, Warren insisted on Styles again, asking if ED broke your contract or punished your company in any way for its mistakes and mismanagement of the PSLF program.
Styles replied, “No, it is not.”
According to a letter from Richard Cordray of ED Federal Student Services, who heads the student loan program, between February 2016 and March 2021, PHEAA was indeed fined and / or recommended by the federal government to correct its behavior.
As stated in the senators’ letter, the company’s CEO “is inexplicable that you were unaware of this series of … results.”
Cordray’s letter to senators, which was received by Yahoo Finance, stated:
ED said that between February and April 2016, ED found that PHEAA made an error in calculating payments of 28%. The error rate was reduced to 3% in October 2016 after PHEAA implemented ED guidelines and the company automated billing.
In 2017, ED said it had found problems with how PHEAA conducts job certification and, again, calculating related benefits. Both surveys identified problems with the way he allocated consolidation loans and found an incorrect valuation of the loan accounts when the borrower paid more than was required. The government ordered PHEAA to correct the accounts.
In 2020, ED conducted three reviews again: TEPSLF and PSLF. At TEPSLF, he discovered rejection issues, which led the government to ask PHEAA to correct his mistakes and “demanded FedLoan pay $ 108,000 to the Department in June 2020.”
For the PSLF, ED found that there was a 20% error rate in CARES denial (ie, during this period, the government made payments to the PSLF on behalf of the borrowers). ED told PHEAA to fix the matter.
In September 2020, ED began looking into how PHEAA handles related consolidated loan payments.
In October 2020, ED fined PHEAA $ 136,000 and asked the company to correct its mistakes for “failing to properly apply automatic deferral to income-adjusted repayment requests … affecting more than 65,000 borrowers.”
In March 2021, ED found 20% bugs in the way PHEAA handles PSLF military applications.
Finally, ED also announced that it is developing new corrective action plans to address recent issues such as the CARES Act and PSLF waivers.
“ They make tons of money. ”
Some legislators and defenders have long blamed service providers for poor implementation.
“Rampant disruptions in the student loan market are damaging every type of borrower, every type of loan, at every stage of repayment,” said former Consumer Financial Protection Bureau (CFPB) employee Seth Frothman. said in testimony before Congress in September 2019.… “Lost paperwork, improperly processed payments, false disclosures and regular denials of borrowers’ rights to repayments all add up to billions of dollars in additional debt for millions of borrowers.”
IN interview with Yahoo Finance in AprilWarren said, “We have these middlemen, these student loan servants, who were with us today, and who just can’t seem to keep it straight.”
Warren also urged ED to end its collaboration with Navient and PHEAA.
“These student loan debt service workers are making tons of money to help their bottom line, but not to help students who are really struggling to pay off their loans,” she said.
Aarti is a correspondent for Yahoo Finance. She can be contacted at firstname.lastname@example.org. Follow her on Twitter @aarthiswami…