PHEAA v. Kentucky | Brief of Amici Curiae by Kentucky Equal Justice Center and Student Borrower Protection Center

Abstract

In 2018, Kentucky Attorney General Beshear began investigating the servicing of student loans owned by the National Collegiate Student Loan Trusts (NCSLT). These Trusts are notorious for shoddy record-keeping, meaning that servicers and collectors pursue borrowers for debt that they can’t prove are owed. In fact, an internal audit of NCSLT loans found that “a random sample of nearly 400 National Collegiate loans found not a single one had assignment paperwork documenting the chain of ownership.” Attorneys general across the country have started similar investigations as they work to protect the borrowers victimized by “the worst-performing student loan investment vehicles ever created by Wall Street.”

And the company responsible for servicing these student loans—sending out all of the bills, receiving payments, computing interest, and applying people’s payments—is the Pennsylvania Higher Education Assistance Agency (PHEAA), also known as American Education Services. PHEAA is one of the largest student loan servicers in the country and handles over $425 billion in student loan debt owed by millions of consumers nationwide. In fact, one out of every ten dollars of non-mortgage consumer debt in the country is handled by PHEAA. And yet, in Kentucky and around the country, PHEAA is arguing that it is above the law.

PHEAA is asking the Kentucky Court of Appeals to decide whether Attorney General Beshear, Kentucky’s top law enforcement official, has the authority to take action against a company that it suspects is engaged in rampant illegal practices. This amicus brief lays out why Attorney General Beshear should be able to protect Kentuckians by holding unscrupulous student loan companies to account, including PHEAA.