On January 14, 2022, the Department of Justice (DOJ) announced that it reached an agreement with a student loan servicer that had serviced loans under the Federal Family Education Loan (FFEL) Program. The agreement resolves allegations that the loan servicer submitted false claims to the Department of Education (DOE) in violation of the False Claims Act (FCA).
According to the DOJ, between 2006 and 2016, the servicer allegedly failed to make certain required financial adjustments to borrower accounts–including the impact of monthly student loan repayments, principal capitalization, and other changes. The DOJ also alleged that the servicer improperly considered certain borrowers as eligible for military deferments, which resulted in incorrect reporting to the DOE. The company ceased commercially servicing federal student loans in 2019.
Under the settlement agreement, the company agreed to pay $7.9 million to resolve the allegations, $4,675,000 of which is restitution. Prior to this settlement, the company had already paid $1,442,000 to the DOE to resolve some of the allegations raised in the settlement agreement. The company received credit for those payments and under the settlement agreement, agrees to pay the remaining $6,550,000 to resolve the remaining allegations.