Federal student loan servicer ACS Education Services agreed to a $9 million settlement Friday for steering distressed borrowers away from income-based repayment plans towards other, more expensive options. It also addresses claims that ACS deceived borrowers about the availability of loan forgiveness after a borrower works for 10 years in a public-service job.
In addition to paying penalties and restitution to borrowers, ACS has agreed not to service loans for the major federal programs or private loans for five years. Most eligible borrowers will receive between $100 and $450.
“Students rely on college to be a ladder to success, but too often prohibitive costs and disingenuous loan servicers trap students in a quicksand of debt,” said New York Attorney General Letitia James. “ACS has systematically failed borrowers by refusing to educate them on more effective federal repayment options, and instead, pushing them towards options that padded their bottom line.”
At a time when the student debt crisis is at an all-time high, federal loan servicers should be supporting borrowers, not deceiving them at every turn, said James.
“Everyone deserves a fair opportunity to work towards a life without debt,” she said.
In addition to not informing borrowers about their options, ACS, currently known as Conduent Education Services, failed to provide borrowers who wanted to consolidate their loans the account information they needed, preventing some from consolidating for more than three years. These borrowers may have lost years of qualifying service towards public service loan forgiveness and access to better repayment programs.
ACS also:
- Failed to process income-based repayment applications in a timely and accurate way.
- Required some borrowers to reapply for income-based repayment when it wasn’t needed.
- Misallocated payments by borrowers, costing them additional late fees or interest.
- Made inaccurate reports to credit reporting agencies.
- Didn’t inform private-loan borrowers about the possible release of co-signers.
- Overstated the monthly payments owed by members of the armed forces who were eligible for reductions.
- Charged some borrowers late fees higher than the legal cap.
- Consistently misinformed borrowers who were behind one or more payments about the amount they needed to pay to become current on their loans, overstating the amount to maximize collections.
James said it’s the first time charges have been brought against a loan servicer for deceiving student borrowers about lower-cost payment plans and loan forgiveness.
ACS has transferred the private and major federal loans it had been servicing to other servicers, and borrowers should continue to make payments to their current servicers, she said.
Federal student loan borrowers who are having difficulty making their loan payments or who are interested in loan forgiveness can visit the New York Attorney General’s Office’s Student Loan Repayment and Debt Relief Guide or the Department of Education’s website. They can also discuss their options with their servicers.
