Federal class-action lawsuits target practices of Pennsylvania-based student loan agency


Deb Erdley, writing for Trib Live, reports that Arianne Gallagher knew attending law school at the University of Pittsburgh would require taking on a lot of debt.

The native of Chicora, a tiny borough in Butler County, already had borrowed for her undergraduate education from Pitt but believed she could handle more debt and tap the federal government's income-based loan repayment plan to repay the money. The plan allows borrowers who work public service jobs to pay a percentage of their income every year and then forgives any remaining debt after a decade.

Like thousands of others, Gallagher counted on student loan payments being akin to paying rent or car payments.

That is not the case.

Today, she is a plaintiff in one of 10 class-action lawsuits filed against the Pennsylvania Higher Education Assistance Agency that have been bundled in federal court in Philadelphia. The plaintiffs — borrowers from 10 states — say they represent tens of thousands who have been saddled with additional debt because PHEAA cannot or will not properly process their payments.

The agency, which conducts its federal loan business as FedLoan Servicing, does not comment on pending litigation, spokesman Keith New said. But he maintains PHEAA is living up to the terms of its contracts with the U.S. Department of Education. The federal agency hired PHEAA to process payments on 7.6 million student loans, which represents about a quarter of the $1.3 trillion in federal student loan debt owed by 44 million Americans.

The consolidated PHEAA suit is the latest sign of trouble in the student loan arena.

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