The Rise and Fall of ACS Education Services: A Cautionary Tale of Student Loan Servicing
For many student loan borrowers, the name ACS Education Services (also known as Conduent Education Services, AFSA, or Xerox Education Services) evokes frustration and confusion. Once a prominent player in the student loan servicing industry, ACS ultimately ceased operations on September 1, 2019, leaving many borrowers wondering what went wrong and where their loans ended up. This article delves into the history of ACS, the issues that plagued its service, and what borrowers need to know in the aftermath.
ACS: From Leading Servicer to Closure
Affiliated Computer Services (ACS) was a Fortune 500 company specializing in information technology and data outsourcing services. In 2009, Xerox acquired ACS for $6.4 billion, including its student loan division, ACS Education Services (also known as ACS Education Solutions). ACS partnered with private lenders, the federal government, and colleges and universities to manage student loans, providing a centralized online platform for borrowers to access accounts, pay bills, and monitor their loans. For a time, ACS operated as the sole servicer for all student loans made directly by the federal government.
However, ACS's tenure as a leading loan servicer was marred by numerous complaints and ultimately led to its downfall. Due to these complaints, the Department of Education (DOE) did not renew its loan servicing contract with ACS in 2012, although ACS was allowed to continue servicing Perkins loans, private student loans, and Federal Family Education Loans (FFEL). Xerox Education Services LLC, dba ACS Education Services LLC (CES), a contractor that serviced student loans for lenders under the Federal Family Education Loan Program (FFEL), has agreed to pay $7.9 million to resolve allegations that it violated the False Claims Act by submitting or causing the submission of false claims to the Department of Education. Conduent Inc. eventually moved to close down all student loan servicing operations, completing the exit in 2018, with the final cessation of services on September 1, 2019.
A History of Complaints and Mismanagement
ACS faced a barrage of criticism regarding its handling of student loans, dating back to at least 2012. The Consumer Financial Protection Bureau (CFPB) investigated ACS in 2014 and 2015, finding that the company lacked adequate staffing and systems for processing repayments, including forbearance, deferment, and income-based repayment plans. As a result, the CFPB fined ACS $3.9 million.
Specific issues included:
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- Inaccurate Reporting: Loan servicers are required to accurately report the impact of monthly student loan repayments, principal capitalization and other changes to borrower accounts to the Department of Education. The settlement announced today resolves allegations that between 2006 and 2016, CES knowingly failed to make required financial adjustments to borrower accounts and improperly treated some borrowers as eligible for military deferments when they were not, resulting in incorrect reporting to the Department of Education and losses to the United States.
- Steering Borrowers to Forbearance: Some borrowers reported that ACS representatives would steer them toward forbearance instead of providing information about more suitable loan options.
- Misleading Information: ACS . . . regularly undermined the opportunity for students to access appropriate repayment plans”.
- Miscalculated Payments and Mishandled Records: ACS regularly mismanaged the administration of borrowers’ repayment plans. Several servicers reported that borrowers were quoted the wrong payment amounts and terms, possibly disqualifying some of their payments toward loan forgiveness. Many servicers noted that payment records for some borrowers were entirely missing or contained errors.
- Inappropriate Use of Forbearance: ACS applied forbearances far beyond the amount permitted under the law. As a result, borrowers were hit with unexpected, avoidable interest charges that could add thousands of dollars to their loans and placing them into repayment programs ineligible for PSLF.
- Public Service Loan Forgiveness (PSLF) Program Failures: The American Federation of Teachers and the Student Borrower Protection Center released an investigative report exposing millions of student loan servicing errors at the root of the Public Service Loan Forgiveness program. The report identifies over five million new ACS servicing errors that contributed significantly to the PSLF program’s failures and derailed promised loan forgiveness for hundreds of thousands of borrowers. ACS blatantly failed to enroll eligible borrowers in the correct repayment plans to make progress toward PSLF. Further, ACS failed to recertify qualifying program eligibility for borrowers, leaving many under the impression they were still making progress towards loan forgiveness when in reality they missed out on months of payments towards PSLF.
These issues led to significant financial losses for ACS, including payouts to borrowers to settle damages.
The Impact on Borrowers
The mismanagement and errors by ACS had a profound impact on countless borrowers. Some experienced difficulties in making progress toward loan forgiveness, while others were placed in inappropriate repayment plans or faced inaccurate loan balances. The stress and frustration caused by these issues were considerable. As one borrower shared, “I have been paying this loan since 2002 until last year and have not seen the debt amount reduce. It's almost twenty years later, and it looks like I never paid anything.” Another stated, “My student loans were bought by ACS Conduent, and each time I contacted the servicer, they would steer me to forbearance. They did not give me proper information regarding loan options that would suit me."
Finding Your New Loan Servicer
With the closure of ACS, all loans serviced by the company were transferred to other loan servicers. If you were previously an ACS borrower, it's crucial to determine who your new servicer is. Here's how:
- Federal Loans (FFEL, Direct, Perkins): Log into StudentAid.gov, select “My Aid” in the top right corner, and see who is currently servicing your student loans.
- Perkins Loans and Campus-Based Loans: If you had a Federal Perkins loan or campus-based loan, you should have received information from the college the loan was sent to informing you of the change in student loan servicer. Reach out to the school if you have not received this communication. You must first log in using your student credentials and click on the loan number button to view the new servicer and their contact information.
Once you've identified your new servicer, contact them to confirm your loan details, repayment options, and any other relevant information.
Other Options Available
Since all ACS loans were transferred to new loan servicers, your repayment plan no longer lies with them. Yes, it is possible to refinance your ACS student loan. Carefully planned refinancing can reduce your interest rate, help you save money, and cut the repayment period. Notably, federal loans become private loans once you refinance them-you lose access to federal protection, such as income-driven repayment plans, loan forgiveness, and forbearance. Switching from ACS and the loan servicer DOE transferred you to may relieve the long-standing worry of being taken back and forth and receiving inaccurate loan figures.
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Lessons Learned and Moving Forward
The ACS saga serves as a stark reminder of the importance of proper oversight and accountability in the student loan servicing industry. The errors and mismanagement that plagued ACS had significant consequences for borrowers, highlighting the need for:
- Comprehensive Audits: Conduct a comprehensive, independent audit of loans serviced by ACS. Despite ACS’s widespread errors, there has never been a comprehensive accounting of its failures.
- Record Retention Requirements: Establish record retention requirements for all federal student loan servicers. Servicers must be required by the Department of Education to maintain comprehensive account records so that borrowers are not penalized for servicing companies’ errors in the future.
- Expanded Public Service Loan Forgiveness: Congress should again authorize an expansion of the PSLF program for borrowers who have been derailed by misinformation from student loan servicers.
For borrowers who were affected by ACS's errors, it's essential to:
- Review Loan Records Carefully: Scrutinize your loan statements and payment history to ensure accuracy.
- Explore Repayment Options: Understand the available repayment plans and choose the one that best suits your financial situation.
- Seek Professional Advice: If you're struggling to manage your student loans, consider consulting a financial advisor or student loan expert. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt.
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