AG Healey Secures $2.4 Million, Significant Policy Reforms in Major Settlement with Student Loan Servicer
ACS Failed to Implement Income-Based Repayment Plans, Violated Debt Collection Laws and Overcharged Student Borrowers; Payment Includes Restitution for Massachusetts Students
BOSTON – A national loan servicer responsible for handling millions of student loan accounts across the country has agreed to pay $2.4 million over allegations that it failed to properly process struggling Massachusetts students’ applications for federal repayment plans intended to lower their monthly payments and engaged in harassing debt collection practices, amongst other violations of state and federal law, Attorney General Maura Healey announced today.
The assurance of discontinuance, filed on Monday in Suffolk Superior Court, alleges that ACS Education Services (ACS), which services federal loans made under the Federal Family Education Loan (FFEL) program along with private loans, also charged some borrowers excessive late fees, failed to protect some active-duty servicemembers as required by federal law, and made excessive phone calls to borrowers.
“To address this student debt crisis, we need students to be on repayment plans that will help them succeed, not fall further into debt,” AG Healey said. “ACS failed to meet this standard and regularly undermined the opportunity for students to access appropriate repayment plans. This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.”
In December 2015, the AG’s Office launched an investigation into certain student loan servicing practices by ACS, and found that the company allegedly failed to properly process student borrowers’ applications for federal loan relief associated with the Income-Based Repayment Plan established by the Higher Education Act.
ACS also allegedly violated the state’s debt collection regulations by contacting students more than twice a week and did not investigate credit reporting disputes, which led to inaccurate information about students being sent to credit reporting agencies.
ACS – now known as Xerox Education Services, LLC (XES) – cooperated fully with AG Healey’s investigation and is implementing the enhancements to its loan servicing practices.
Under the terms of the settlement, ACS will pay a total of $2.4 million, a portion of which will be paid as restitution to hundreds of Massachusetts borrowers who applied for but were unable to successfully enroll or remain on income-based repayment plans. ACS has also stopped abusive debt collection practices, has reformed the accounts of affected servicemembers, and has credited any late fee overcharges.
In addition, ACS will establish a designated “Borrower Advocacy Group” to provide direct assistance to student borrowers for income-based repayment plan applications and will administer a “Second Look Program” for applications that are rejected to ensure eligible students have every opportunity possible to qualify. The Borrower Advocacy group will also provide information on federal loan discharge applications to students with loans associated with predatory for-profit schools like American Career Institute, Corinthian Colleges, and ITT Tech.
According to the AG’s Office, many student loan servicers – who are operating at the direction of the federal government – often fail to do their jobs by helping students find and enter affordable repayment plans. AG Healey continues to investigate the conduct of other student loan servicers and encourages student loan borrowers who have experienced difficulty enrolling in income-driven repayment plans to file a complaint with the Attorney General’s Office.
Student loan borrowers who are interested in learning more about income-driven repayment plans, need help resolving defaulted loans, have questions about their options, or would like to know if they are eligible for relief under the ACS settlement, should call the Attorney General’s Student Loan Assistance Unit’s Hotline at 1-888-830-6277 or file a Student Lending Assistance Request at www.mass.gov/ago/studentloans.
This matter was handled by Shennan Kavanagh, Deputy Division Chief, and Assistant Attorneys General Samantha Shusterman and Jared Rinehimer, all of AG Healey’s Consumer Protection Division, with assistance from Arwen Thoman, Investigations Supervisor in the Insurance and Financial Services Division.