BOSTON — A state loan assistance program under the attorney general’s office fielded an “unprecedented” number of complaints over the past year from student borrowers about deceptive lender repayment policies.
A recent report by the AG Ombudsman’s Student Loan Assistance Unit said Massachusetts student loan borrowers filed 1,207 complaints and requests for assistance between July 2021 and June 30, 2022. Most of the correspondence involved complaints against college loan servers.
A majority of the complaints were lodged against just three lenders – Navient, one of the nation’s largest college loan servicing companies, The Pennsylvania Higher Education Assistance Agency, and SLM Corporation, formerly known as Sallie Mae.
The most common complaints involved outstanding loan balance concerns, failures to provide affordable repayment options, and misinformation or failures to inform borrowers about federal Income-Driven Repayment options, according to the AG’s Office.
“Nearly half of the borrowers who expressed these concerns indicated that time spent in forbearance had added to their loan balance and many reported that their loans had been in repayment for nearly 20 or more years,” the report’s authors noted.
In the report, Student Loan Ombudsman Arwen Thoman wrote that the federal student loan system is “fundamentally broken” and is “taking a devastating toll on millions of Americans” that disproportionately impacts women and minorities.
“It is a system that has enabled for-profit schools to deceive and defraud vulnerable students who were seeking a better life,” they wrote. “And it is a system that has hollowed out the futures of millions of young people and left them with a lifetime of insurmountable debt.
Student loan servers have come under increasing scrutiny from states and the federal government in recent years amid allegations of predatory lending that has contributed to a record level of student debt.
Last year, the AG’s office reached a settlement with the Pennsylvania Higher Education Assistance Agency to resolve allegations its “deceptive practices” caused public servants in Massachusetts and other states to lose benefits and financial assistance under two federal programs.
Two weeks ago, then-Attorney General Maura Healey announced a multimillion-dollar settlement with Navient in a lawsuit alleging predatory lending and deceptive business practices.
The $1.85 billion settlement, which includes Massachusetts and 38 other states, will resolve claims that Navient steered tens of thousands of struggling student loan borrowers into costly long-term forbearances instead of more affordable income-driven repayment plans.
All other New England states were also part of the lawsuit, except New Hampshire.
Under the settlement, the company will be required to cancel $1.7 billion in subprime private student loan debt owed by nearly 66,000 borrowers and make $95 million in restitution payments to about 350,000 federal loan borrowers who were placed in certain types of long-term forbearance.
More than 8,300 Massachusetts borrowers who took out federal loans will get about $6 million in loan relief, Healey said. Another 1,500 borrowers who took out private loans through the company will receive more than $41 million in private loan relief.
The company — which is also in federal court over claims that its lending tactics inflated borrowers’ bills — has said it “expressly denies violating any law, including consumer-protection laws, or causing borrower harm.”
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com.
