Massachusetts Attorney General Maura Healey announced yesterday that national student loan servicer ACS - now known as Xerox Education Services, LLC, (ACS/XES) has agreed to pay a $2.4 million settlement over allegations that it failed to properly process struggling students’ applications for federal repayment plans intended to lower their monthly payments, and engaged in harassing debt collection practices.

The Assurance of Discontinuance, filed on Monday in Suffolk Superior Court, also alleged that ACS, which services federal loans made under the Federal Family Education Loan (FFEL) program, along with private loans, charged some borrowers excessive late fees, failed to protect some active-duty servicemembers as required by federal law, and made excessive phone calls to borrowers.

The press release from the AG’s office notes that ACS/XES is a company responsible for servicing millions of student loan accounts across the country.

In December 2015, the AG’s office launched an investigation into certain student loan servicing practices by ACS, and found that the company allegedly failed to properly process student borrowers’ applications for federal loan relief associated with the Income-Based Repayment Plan established by the Higher Education Act. The investigation suggested that ACS also allegedly violated the state’s debt collection regulations by contacting students more than twice a week and did not investigate credit reporting disputes, which led to inaccurate information about students being sent to credit reporting agencies.

ACS/XES cooperated fully with AG Healey’s investigation and is implementing the enhancements to its loan servicing practices.

Under the terms of the settlement, ACS/XES will pay a total of $2.4 million, a portion of which will be paid as restitution to hundreds of Massachusetts borrowers who applied for, but were unable to successfully enroll or remain on, income-based repayment plans. ACS/XES has also stopped abusive debt collection practices, has reformed the accounts of affected servicemembers, and has credited any late fee overcharges.

In addition, ACS/XES will establish a designated “Borrower Advocacy Group” to provide direct assistance to student borrowers for income-based repayment plan applications and will administer a “Second Look Program” for applications that are rejected to ensure eligible students have every opportunity possible to qualify. The Borrower Advocacy group will also provide information on federal loan discharge applications to students with loans associated with predatory for-profit schools like American Career Institute, Corinthian Colleges, and ITT Tech.

“To address this student debt crisis, we need students to be on repayment plans that will help them succeed, not fall further into debt,” AG Healey said. “ACS/XES failed to meet this standard and regularly undermined the opportunity for students to access appropriate repayment plans. This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.”

Student loan borrowers who are interested in learning more about income-driven repayment plans, need help resolving defaulted loans, have questions about their options, or would like to know if they are eligible for relief under the ACS settlement, should call the Attorney General’s Student Loan Assistance Unit’s Hotline at 1-888-830-6277 or file a Student Lending Assistance Request at

insideARM Perspective

This action by the Massachusetts AG’s office is not surprising.  Servicing of student loans has been a hot-button issue for consumer groups and regulators for quite some time.  Horror stories about confusion and inconsistencies from student borrowers are easy to find.

The Consumer Financial Protection Bureau (CFPB) has also announced to the world that they are looking to dramatically reform the industry. On September 29th of this year the Bureau issued a Student Loan Servicing Report which included recommendations for reform, and the CFPB’s October, 2016 Supervisory Highlights report shared findings from recent examinations in the areas of student loan servicing.

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