The Pennsylvania Higher Education Assistance Agency — which oversees loans of 8.5 million student borrowers — announced it would not renew its contract with the federal government when it ends later this year.
Consumer advocates applauded the news because PHEAA, a quasi-governmental student aid organization created in 1963 by the Pennsylvania General Assembly, has been accused of providing borrowers with misleading information and making it harder for them to access relief programs.
Just around 5% of borrowers who’ve applied for the national public service loan forgiveness program, which PHEAA administers, have been approved according to recent data.
The agency, which is known to borrowers as FedLoan, is one of several companies the Education Department pays to manage the government’s $1.59 trillion student loan portfolio.
More from Personal Finance:
The upside to inflation: rising wages
The stock market is falling. Should you sell?
It’s the best summer for teen jobs since 1953
“Student loan borrowers across the country, including millions of teachers and other public service workers, received the welcome news that the Department of Education will no longer rely on a company accused of widespread mismanagement and abuse to handle millions of borrowers’ student loans,” said Seth Frotman, executive director of the Student Borrower Protection Center, in a statement.
