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Press Advocates Warn: Student Loan Companies Seek to Undermine PSLF Overhaul to Pad Profits

Advocates Warn: Student Loan Companies Seek to Undermine PSLF Overhaul to Pad Profits

Unions Representing Millions of Educators, Nurses, and Public Service Workers Demand that Industry Follow Through on the Department of Education’s Historic PSLF Overhaul

December 6, 2021 | WASHINGTON, DC — Today the Student Borrower Protection Center (SBPC) and a coalition of the nation’s largest unions representing millions of public service workers sent letters to 25 large student loan companies demanding immediate action to ensure successful implementation of the Department of Education’s recent overhaul of the Public Service Loan Forgiveness (PSLF) program. A review of industry practices by the SBPC found that many of these companies are currently providing misleading and outdated information to borrowers that could derail efforts to access relief under the recently revamped PSLF program. Together, the 25 companies hold more than $122 billion in older federal student loans originated under the now-defunct Federal Family Education Loan Program (FFELP).

As public service workers with older federal student loans seek to take advantage of the new time-limited opportunity that the Department announced in October to receive credit toward PSLF, these borrowers must have access to timely, accurate, and complete information from the student loan companies that manage their loans. Today’s letter highlights the urgent need for law enforcement scrutiny of these companies given the industry’s deplorable track record of misleading FFELP borrowers and blocking them from accessing PSLF.

Read the letter to industry here.

A set of exhibits documenting FFELP loan holders continuing to mislead borrowers and provide bad information related to the ongoing PSLF waiver is available here.

American Federation of Teachers President Randi Weingarten:

“Both the Biden Administration’s reforms and the landmark settlement in Weingarten v. DeVos were a ray of light for hundreds of thousands of public service workers struggling under the yoke of student debt that should have been discharged years ago. Now is the time for action on PSLF, but instead of pushing for relief, some big banks and financial institutions have sat idly by, leaving borrowers in the lurch when they should be seeing reduced or zero balances. We cannot allow loan behemoths like Navient and Sallie Mae to continue to undermine these waivers through a policy of benign neglect aimed at padding their own bottom lines.”

National Education Association President Becky Pringle:

“No matter what we look like, where we live, or what’s in our wallets, all of us should be able to pursue our dreams at an affordable college or university. But today, the cost of college forces many students and families to forego their education goals or be trapped in a lifetime of debt. The least the student-loan profiteers should do is provide accurate guidance on loan forgiveness.” 

Student Borrower Protection Center Executive Director Mike Pierce:

“For more than a decade, the student loan industry has fought tooth and nail to block public service workers from the promise of loan forgiveness. Today, organizations representing nearly nine million working people have drawn a line in the sand: we expect these companies to deliver debt relief to their customers and we will fight any effort to defraud or deceive public service workers.”

SBPC Findings Show Industry is Still Failing Public Service Workers

In October, the Department announced it would overhaul PSLF and temporarily modify the eligibility requirements that public service workers must meet to secure debt relief. Among other changes, the Department is allowing borrowers who consolidate FFELP loans into Direct loans before October 31, 2022 to receive credit toward PSLF for any time spent in repayment on their FFELP loans. Outside of the waiver, borrowers’ count of payments toward PSLF would reset to zero upon consolidation from a FFELP loan into a Direct loan, regardless of how long they had been in repayment on their loans.

FFELP borrowers who intend to utilize the revamped program should receive accurate information from their current servicer to learn about their rights and receive guidance through the consolidation process. However, an SBPC review found that among the websites of the 25 largest FFELP loan holders,13 lacked any information about PSLF and 9 contained language that was wholly inaccurate or otherwise clearly likely to mislead borrowers.

For example:

  • The website of the FFELP loan owner and servicer AES, a brand of the Pennsylvania Higher Education Assistance Agency (PHEAA), continues to state that borrowers are eligible for PSLF only if they “have eligible Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans (made to parents or students), Direct Consolidation Loans, and Special Direct Consolidation Loans.” This is likely to mislead borrowers in repayment on FFELP loans into thinking that there is no way for them to become eligible for PSLF or receive credit for their time already spent in repayment. Such an impression would directly contradict the terms of ED’s waiver, which states, “[t]his waiver will allow student borrowers to count all payments made on loans from the Federal Family Education Loan (FFEL) Program or Perkins Loan Program.” PHEAA has previously been sued in state courts across the country for conduct related to PSLF.
  • The website of the FFELP loan owner and servicer Navient continues to state: “Keep in mind that if you are paying your current loans under an Income-Driven Repayment plan, or making qualifying payments toward Public Service Loan Forgiveness, then you will lose any credit toward loan forgiveness for payments made prior to consolidation.” This is inconsistent with the guidance cited above making clear that consolidation will not lead borrowers to lose credit toward loan forgiveness. Beyond the litigation cited above, Navient has previously faced legal action at the state and federal level related to its poor and abusive servicing practices.
  • The website of the FFELP loan owner and servicer Nelnet continues to state that, “[i]f you consolidate any loans that would be eligible for the Public Service Loan Forgiveness (PSLF) Program, such as Direct Loans, you will lose credit for any qualifying payments that you have already made prior to consolidation. You will need to make another 120 qualifying payments on your new Direct Consolidation Loan.” As noted, this is a direct contradiction of ED’s October guidance.
  • The website of the FFELP loan owner and servicer ECMC continues to state that payments made in the Extended and Graduated payment plans are “not a qualifying repayment plan for PSLF.” ED has clearly communicated that the PSLF waiver allows borrowers to “count payments from all federal loan programs or repayment plans toward forgiveness.” ECMC is currently under investigation for “a scheme that aims to put off debt rehabilitations and consolidations to unfairly maximize collections costs” levied on federal student loan borrowers.
  • The website of the FFELP loan owner and servicer Sallie Mae raises various “Questions to answer before consolidating or refinancing student loans,” including the question “Will you lose any current student loan benefits, such as repayment options or Public Service Loan Forgiveness?” Given that the answer to this question was generally “yes” before ED’s October waiver but is explicitly “no” ‘in the context of the waiver, this question’s continued presence on Sallie Mae’s website is likely to confuse FFELP borrowers.
  • Reports on social media reflect borrowers receiving incorrect information from a number of FFELP holders and servicers. For example, a borrower reported being erroneously told by Nelnet that payments toward PSLF made after consolidation “wouldn’t count unless she reaches 120 by Oct 2022.”

In fact, only one guarantee agency among those examined (the Kentucky Higher Education Student Loan Corporation) had any explicit mention of ED’s October waiver on its website, and even that was surrounded by outdated and misleading information regarding whether borrowers could qualify for PSLF.

A set of exhibits documenting FFELP loan holders continuing to mislead borrowers and provide information related to the ongoing PSLF waiver is available here.

Today’s letter includes a request for immediate and regular reporting by the student loan industry regarding progress in guiding borrowers toward consolidation, as well as a reminder that scrutiny by state and federal law enforcement agencies surrounding the implementation of the PSLF can be expected given their broad and overlapping authority related to issues related to student loan debt.

Today’s letter was signed by:

American Association of University Professors

American Federation of Government Employees

American Federation of State, County and Municipal Employees

American Federation of Teachers

Coalition of Labor Union Women

International Federation of Professional and Technical Engineers

Labor Council for Latin American Advancement

National Treasury Employees Union Independent Staff Union

Nonprofit Professional Employees Union (IFPTE Local 70)

National Education Association

Service Employees International Union

Background: an Industry Track Record of Ripping Off Borrowers

Passed into law with bipartisan support in 2007, PSLF made student loan borrowers a simple but powerful promise: after ten years of service to our nation or in their communities, public service workers would be given the opportunity to have their loans forgiven. However, extensive industry malfeasance, policy failures, and negligence by the Department of Education have resulted in a 98 percent denial rate.

The companies that own FFELP loans have been a key driver of this breakdown. In order to access PSLF, FFELP borrowers must consolidate their loans into a different type of loan known as Direct loans. A wave of enforcement actions, lawsuits, and investigations over the past decade have revealed that the companies that own or service FFELP loans have systematically misled or obstructed borrowers who sought information about how to qualify for PSLF to serve their own bottom line.

Research by the SBPC shows that the companies that own FFELP loans face a financial incentive to block borrowers from accessing loan forgiveness. The results of these abuses are stark, with ED recently reporting that “a significant share of borrowers rejected from PSLF have been in repayment for 10 years or more but lost progress due to the timing of the consolidation of FFELP loans into Direct loans. 

Examples of widespread abuses against public service workers by companies that own FFELP loans include the following:

  • Active, intentional steering of FFELP borrowers away from PSLF by the student loan servicer ACS. In 2019, the New York Department of Financial Services and New York Attorney General took action against the student loan servicer Affiliated Computer Services (ACS), formerly a division of Xerox, for tricking public service workers out of their right to PSLF. As the consent order in this case explained, “ACS managers directed representatives not to provide information on PSLF eligibility criteria to borrowers who contacted ACS seeking information about the program.” This conduct robbed borrowers of months or years of progress toward PSLF.
  • Extensive misdirection and lies by the student loan servicer Navient. In 2020, the massive student loan servicer Navient settled Hyland v. Navient, a class action lawsuit brought by members of the American Federation of Teachers (AFT). These teachers alleged that Navient lied to them about their eligibility for PSLF, costing them years of lost payments toward promised loan forgiveness. Navient is the largest owner of FFELP loans, and it had previously been caught systematically pushing borrowers off the phone and often into inappropriate repayment options—regardless of what would be right for the borrower—so that the company might pad its profits. As part of this settlement, Navient agreed to reform its approach to communicating with public service workers about PSLF.
  • Widespread, ongoing misrepresentations. As recently as June 2021, the Consumer Financial Protection Bureau reported that it had caught FFELP loan holders in the past year still telling borrowers that their loans do not qualify for PSLF without going on to explain that consolidating into a Direct loan will remedy that situation. FFELP loan holders have an incentive not to share this information because only one servicer, PHEAA, is tasked with servicing all loans owed by borrowers pursuing PSLF, meaning that the FFELP servicers will lose business if it follows the law and transparently informs borrowers of their rights.


The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

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