Feds say Healey can’t sue student loan servicer

The federal government has accused Massachusetts Attorney General Maura Healey of overreaching with her lawsuit accusing a student loan servicer of unfair and deceptive practices.Steven Senne/Associated Press/file 2017

Siding with a student loan servicer, the federal government has accused Massachusetts Attorney General Maura Healey of overreaching with her lawsuit accusing the Pennsylvania Higher Education Assistance Agency of unfair and deceptive practices.

The US Department of Justice filed papers in Suffolk Superior Court this week arguing that the federal government and the US Department of Education have authority to oversee the student loan servicers and that Healey cannot pursue claims under state law.

Justice officials, who were representing the Education Department, said they had to take action to “preserve the important federal interests in cost-effectively and uniformly administering and streamlining the federal student loan programs,” according to court documents.

The Pennsylvania Higher Education Assistance Agency, a student loan servicers in the country, Wednesday asked a Suffolk County judge to dismiss Healey’s case.

But Healey, who has been vocal on student loan issues, said her office is trying to protect Massachusetts consumers.

The student loan servicer’s practices were “shoddy” and “caused significant financial harm to thousands of Massachusetts students. We sued to hold the company accountable for cheating students and families under Massachusetts law and the Department of Education has no business in this case,” Healey said.

Healey alleges that PHEAA, which does business as FedLoan Servicing, violated state and federal laws by causing teachers and others to lose benefits and financial assistance under the Public Service Loan Forgiveness program. Under the federal program, students can get their loans forgiven after 10 years of public service, a benefit designed to encourage graduates to take lower-paying jobs in government and nonprofits.

Healey alleged in her lawsuit last August that PHEAA prevented borrowers from making certain monthly payments that counted toward their loan forgiveness and also overcharged students. The loan servicer disputed the allegations at the time.