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New York State attorney general Letitia James announced Wednesday that she has secured student debt relief for thousands of New York borrowers whose federal loans were allegedly mismanaged by the Pennsylvania Higher Education Assistance Agency. In an agreement with the Office of the Attorney General, PHEAA is required to audit thousands of accounts to identify errors that may have caused borrowers to miss out on benefits, such as income-driven repayment plans or debt forgiveness for eligible borrowers under the Public Service Loan Forgiveness program.

PHEAA, which operates as FedLoan Servicing and American Education Services, will correct errors identified in borrowers’ accounts and provide monetary relief as restitution for some borrowers as appropriate. More than 300,000 borrowers are eligible to have their accounts reviewed for free and are encouraged to request an audit. This agreement resolves an earlier lawsuit brought against the student loan servicer over allegations that it failed to properly manage student loans and administer the PSLF program by inaccurately counting loan payments, improperly denying applications and not processing applications in a timely manner.

While PHEAA has announced that it will stop serving federal student loans when its current contract with the U.S. Department of Education ends in December, it has committed to taking the necessary steps to complete the automatic and discretionary reviews as part of the agreement.

PHEAA issued a statement on Thursday: "The settlement resolves all allegations in the lawsuit while reaffirming PHEAA’s commitment to federal student loan borrowers. It does not obligate the agency to pay any fines or penalties to the New York attorney general’s office, nor does it identify any accounts which were mismanaged or require rectification."