Student loan servicer Xerox Education Services will pay $2.4 million in a settlement agreement over allegations it mishandled students borrowers' applications for income-based repayment plans, Massachusetts Attorney General Maura Healey announced Tuesday.
Xerox -- known as ACS Education Services when the state launched its investigation -- serviced both federally backed student loans under the FFEL program and private student loans. The attorney general's office alleged that the company charged excessive late fees, did not protect active-duty service members and made calls to borrowers multiple times a week.
"To address this student debt crisis, we need students to be on repayment plans that will help them succeed, not fall further into debt," Healey said.
But the company undermined students' ability to enroll in those repayment plans, the attorney general said.
A portion of the settlement money will go toward restitution of the Massachusetts borrowers unable to enroll in lower payment plans. The company will also create a "borrower advocacy group" to provide assistance to borrowers looking to enroll in the plans in the future. The group will also provide information on federal loan discharge applications to students with loans associated with shuttered for-profits like Corinthian Colleges and ITT Technical Institute.
Healey has been aggressive in pursuing both loan servicing companies and for-profit colleges for alleged misconduct. Earlier this summer, American Career Institute -- a for-profit college Healey sued in 2013 -- admitted to deceptive practices and violating state law. And Healey has pushed for clear federal standards for former students of institutions like Corinthian to seek cancellation of their student loan debt.