Federal Watchdog Issues Scathing Report On Ed Department’s Handling Of Student Loans
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Ed Dept failed to protect borrowers from companies that manage federal student loans, watchdog says in scathing report
Navient and the Pennsylvania Higher Education Assistance Agency, better known as FedLoan.
The audit documents several common failures by the servicers, among them, not telling borrowers about all of their repayment options, or miscalculating what borrowers should have to pay through an income-driven repayment plan. According to the review, two loan servicing companies, Navient and the Pennsylvania Higher Education Assistance Agency, better known as FedLoan, repeatedly placed borrowers into costly forbearance without offering them other, more beneficial options.
A critical new report from the U.S. Department of Education’s Office of Inspector General finds the department’s student loan unit failed to adequately supervise the companies it pays to manage the nation’s trillion-dollar portfolio of federal student loans. The report also rebukes the department’s office of Federal Student Aid for rarely penalizing companies that failed to follow the rules.
BREAKING: Education Dept failed to protect borrowers from companies that manage federal student loans, watchdog says in scathing report. https://t.co/syC3a8GZoB
— NPR's Education Team (@npr_ed) February 14, 2019
Instead of safeguarding borrowers’ interests, the report says, FSA’s inconsistent oversight allowed these companies, known as loan servicers, to potentially hurt borrowers and pocket government dollars that should have been refunded because servicers weren’t meeting federal requirements.
“By not holding servicers accountable,” the report says, “FSA could give its servicers the impression that it is not concerned with servicer noncompliance with Federal loan servicing requirements, including protecting borrowers’ rights.”
“It’s hard to look at this as anything other than completely damning,” says Seth Frotman, a consumer advocate and former government, student loan watchdog who is now executive director of the Student Borrower Protection Center. “This is the most damaging in a long line of investigations, audits, and reports that show the Department of Education is asleep at the switch when it is responsible for over a trillion dollars of student loan debt.”