Three Illinoisans have filed a class action complaint accusing student loan lenders of improperly cancelling loan repayment plans, misprocessing applications to income-driven repayment programs and improperly applying delinquency forbearances, causing borrowers to incur interest and potentially pay much more to repay their loans they otherwise should have.
In a complaint filed Jan. 18 in Chicago federal court, Hannah Rockwell, Zac Strupeck and Stacey Puccini alleged Pennsylvania Higher Education Assistance Agency, which does business as FedLoan Servicing Inc., breached contracts with the federal government, interfered with written agreements and violated several state and federal laws connecting with servicing the loans.
According to the complaint, PHEAA manages more than $100 billion in total assets and administers loans to nearly 4 million borrowers. The plaintiffs said the Consumer Financial Protection Bureau’s student loan ombudsman received 3,900 complaints from borrowers between March 1 and Aug. 31, 2016, relating to problems managing or repaying federal student loans and focused on payment processing, billing, customer service, borrower communications and IDR plan enrollment.
The plaintiffs further said complaints about IDR processing “accounted for 39 percent of all complaints made against PHEAA, nearly double the industry average.” In second place, at 15 percent, were complaints about communications with borrowers. Rather than address the concerns, the complaint stated, “PHEAA has consistently shifted the consequences of its processing failures onto the borrowers themselves.”
Puccini said PHEAA failed to place her loan into a 60-day administrative forbearance as she converted from a standard to an income-driven plan, which caused interest to accrue on her loan balance as PHEAA processed her request.
Rockwell was not properly notified PHEAA approved her IDR request. She said the company uploaded monthly billing statements to a paperless inbox, but did not notify her of those statements via mail or email. As a result, she missed multiple payments between June 2016 and January 2017, causing her loans to become delinquent. She called the company that month and agreed to enroll in a direct debit program, but in March PHEAA uploaded a renewal notice and again did not notify her of that notice via mail or email. She did not renew before expiration, and PHEAA added $558 of unpaid interest to her balance.
Strupeck alleged PHEAA approved his IDR request and then canceled a week later, citing a “lender error.” That switched him from a monthly payment of $423 to $894. The company said it was unable to resolve its error for four months, at which point his accrued interest was capitalized at $5,715, “allowing PHEAA to benefit from its own error,” according to the complaint.
The complaint seeks creation of five nationwide classes and five Illinois classes, all open to people whose loans were originated in the past decade. Each class could include at least 100 members.
Formal allegations include multiple counts of tortious interference with contract and breach of contract as well as violations of the Illinois Consumer Fraud and Deceptive Business Practices Act and violations of Pennsylvania state law.
In addition to class certification and a jury trial, the plaintiffs want the court to force the PHEAA to stop the alleged unlawful conduct and award at least $5 million in compensatory and punitive damages.
Representing the plaintiffs, and seeking to serve as class counsel, are attorneys from the firms of Edelman Combs Latturner & Goodwin LLC, and Fiorentino Law Offices Ltd., both of Chicago.