Senator Elizabeth Warren said the CEO of the Pennsylvania student debt agency “lied” to Congress. He says he could have been clearer | New


Senator Elizabeth Warren, D.-Mass., Targeted a key Pennsylvania agency that handles student debt, saying its leader lied to her committee and that other companies could better manage federal student loans.

“We are currently dealing with… a CEO who appeared before the subcommittee and lied,” Warren said in a recent interview with James H. Steeley, who heads the Pennsylvania Higher Education Assistance Agency (PHEAA). Known nationally as FedLoan, the agency serves approximately 8 million federal student borrowers.

Steeley’s comments to the subcommittee are at issue, in which he said PHEAA was not “penalized” for loan service errors even though the agency was fined twice in 2020, for a total of $ 244,000. Steeley denied misleading Warren, but added that “in hindsight, I see that some of my answers were not as clear as they could have been”.

Hundreds of job losses are also happening to PHEAA following its decision to shut down its FedLoan unit this fall from running a contract that includes the civil service loan forgiveness program. Politicians, union leaders and borrowers have called the program a failure while two state attorneys general sued FedLoan for servicing its federal loans.

The loss by PHEAA of the contract with the Department of Education will result in the loss of about 70% of the student loans it manages to this once nationally known body.

“Some staff cuts will be inevitable,” PHEAA spokesman Keith New said. But he added that “we do not envision any immediate reduction. We also expect normal employee attrition, especially in our call centers, to mitigate any impact over time.”

The PHEAA has eliminated about a third of its workers in the past five years, even as federal education department fees increased. Its number of employees has grown from 3,600 in 2016 to 2,300 now in call centers and administrative offices, primarily in Harrisburg, according to the records.

The local AFSCME union which represents PHEAA employees did not respond to comments. On Glassdoor, an employee this month posted that the PHEAA is “not a bad place but currently a sinking ship.” The employee added that since the agency “has lost [its] long contract, seniority is very important. “

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PHEAA cited lower profitability in its decision and will focus on other areas of business, including licensing its software and managing loans for other clients.

State Senator Art Haywood, D-Montgomery / Philadelphia, said it was time for the state agency to forgo the federal contract because it had become a chore.

“There is a long history that the PHEAA has been blamed for implementing program rules emanating from Congress,” said Haywood, a member of the PHEAA board since 2018. Warren’s accusation “didn’t” was not the straw that broke the camel’s back. I would say that was another example of how difficult it is to work with the federal government in this contract. It was disappointing how he (Steeley) was treated “in his testimony.

Haywood said the business opportunity to bid on the contract “was far worse than ending the relationship.”

Even before the showdown at Warren’s April hearing, the PHEAA faced growing legal and political pressure. A long-running lawsuit by a federal whistleblower had stripped PHEAA of legal immunity as a government entity, opening the agency to prosecution.

Massachusetts Attorney General Maura Healey sued the PHEAA in 2017 on behalf of her state’s borrowers, claiming the PHEAA made mistakes. The PHEAA settled the case in early 2021 without admitting to wrongdoing, but agreed to check the account statements of Massachusetts borrowers.

New York Attorney General Letitia James is also suing the Pennsylvania agency.

Former education secretary Betsy DeVos, appointed by Trump, was seen as friendly towards student loan managers. But with the Biden administration, new people with different opinions have assumed positions of power in the education ministry.

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Richard Cordray, the first director of the Consumer Financial Protection Bureau, the agency created after the subprime mortgage crisis, has been appointed director of operations for Federal Student Aid at the Department of Education.

Among its responsibilities, PHEAA has been the exclusive loan manager of the civil service loan forgiveness program that clears student debt for college graduates in lower paying civil service jobs if they meet certain criteria.

Unions, teachers, political leaders and reformers say the forgiveness program has failed many of those it promised to help.

Between November 9 and April 30, student borrowers submitted 391,333 applications for the program. But the PHEAA only accepted 3,458 for student debt cancellation, according to federal data.

PHEAA officials blame mistakes made by other loan officers, federal bureaucratic rules and the borrowers themselves for failing to make 10 years of payments as required.

Steeley was responding to a question at the Economic Policy Subcommittee hearing on April 13, chaired by Warren, when he said PHEAA had not been penalized for its handling of the pardon program.

A month later, Cordray informed Warren of the multiple criticisms of the PHEAA’s performance. .

The ministry instituted four corrective measures to address the issues and imposed two fines on the PHEAA, one for $ 108,000 and one for $ 136,000 in June and October 2020.

Additionally, Cordray noted that Department of Education officials found that FedLoan had a 20% error rate in pardon requests from members of the military.

Warren and the leading Republican on the subcommittee, US Senator John Kennedy, R-La., Wrote to Steeley that it was “incomprehensible that you have subjected yourself to criminal penalties by providing” knowingly and willfully ” false information to Congress “.

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Steeley responded on July 2 that he had not “voluntarily provided false testimony” and that he was nervous because he had never testified before Congress.

“I have done my best to accurately answer your questions in real time,” said Steeley, who earns $ 334,950 per year.

About a week later, the PHEAA announced that it would not seek an extension of the Department of Education’s contract for servicing student loans. The agency had the contract for a dozen years. Steeley declined to be interviewed for this story.

Warren said the Department of Education has “stepped up its efforts and said that previously when student loan payers could do whatever they wanted and make a profit, those days were gone. The PHEAA decided that they would leave the field.

As for PHEAA’s claim that the student loan service has become less profitable, Warren said other companies may bid on the contract. “This is how the markets work. There is a lot of profit.”


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