Mass. student loan repayment case settled for $2.4m

WASHINGTON — ACS Education Services, a company that once managed one of the largest portfolios of student loans, will pay Massachusetts $2.4 million to settle charges of abusive collection practices and sloppy handling of accounts, the state attorney general’s office said Tuesday.

Student loan servicing companies such as ACS have drawn the ire of consumer advocates and liberal lawmakers who say the firms are not doing enough to help people struggling with education debt. Servicers are paid millions of dollars by the federal government and private lenders to collect monthly payments, answer questions, and ultimately keep people from defaulting on their loans. Yet state and federal authorities say some servicers are falling short of those aims.

In the case of ACS, Massachusetts Attorney General Maura Healey claims the company delayed processing applications for income-driven repayment, a federal program that caps monthly student loan payments to a percentage of a borrower’s earnings. She alleges the company charged some borrowers excessive late fees on suspended accounts and flooded others with a barrage of debt collection calls in violation of the law. ACS also failed to comply with a federal law that caps interest rates for active-duty troops at 6 percent, according to the complaint.

‘‘ACS . . . regularly undermined the opportunity for students to access appropriate repayment plans,’’ Healey said in a statement. ‘‘This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.’’

A portion of the $2.4 million fine will be paid as restitution to hundreds of Massachusetts borrowers who applied for but were unable to successfully enroll or remain in an income-based repayment plan. ACS has already credited any late fee overcharges, refrained from calling borrowers more than twice a week, and reformed the accounts of affected military personnel, according to Healey’s office. The company must also review the applications of borrowers rejected from the income-driven plans, as a part of the settlement.

Healey said ACS, owned by Xerox, cooperated fully with her investigation.