Pennsylvania Higher Education Assistance Agency (PHEAA): An Overview
The Pennsylvania Higher Education Assistance Agency (PHEAA) was established in 1963 by the Pennsylvania General Assembly with the aim of enhancing higher education opportunities for residents of the Commonwealth by providing affordable access to higher education for PA students and families. Over the years, it has evolved into one of the nation’s leading student aid organizations.
PHEAA's Core Functions
PHEAA administers the grant program for the Commonwealth of Pennsylvania and serves as a coordinating body for other grant programs administered by other state agencies. It also served as one of several student loan guarantors in the United States for the Federal Family Education Loan Program (FFELP), under the Higher Education Act of 1965. PHEAA conducts its student loan servicing activities nationally as FedLoan Servicing and American Education Services (AES). In that role, PHEAA facilitates payments between borrowers and the financial organizations that lend them money.
PA Forward
Through the years, PHEAA has evolved into one of the nation’s leading providers of student financial aid services, including the Commonwealth’s state-based student loan program-PA Forward.
Student Aid and Scholarships
PHEAA offers many types of scholarships to those that qualify. In order to receive a PA State Grant, a student must demonstrate financial need and meet all eligibility requirements. Students must also demonstrate exceptional financial need. For incoming, current, and transfer students who have not previously applied for or received a PA State Grant, the deadline to file the FAFSA for state grant award consideration for the Fall Term is August 1.
Fostering Independence Tuition Waiver (FosterEd)
This program provides a waiver for tuition and mandatory fees charged by most postsecondary institutions located in the Commonwealth for youth who are or were in foster care.
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PA State Grants
PA State Grants scholarships have been capped at $4,123 for three consecutive years, according to PennLive. Some of the funds for those grant programs come from annual appropriations in Pennsylvania’s state budget.
Loan Servicing Operations
PHEAA also has a loan servicing operation for student loans that it owns and for lenders under contract.
FedLoan Servicing
PHEAA conducts its student loan servicing activities nationally as FedLoan Servicing. Department of Education's ability to service student loans owned by the federal government and is one of a limited number of organizations approved by the Department to service these loans.
American Education Services (AES)
PHEAA conducts its student loan servicing activities nationally as American Education Services (AES). AES was created to guarantee and service a variety of Federal Family Education Loan Program (FFELP) and private student loan products for lending partners nationwide.
Governance and Structure
As a quasi-governmental agency, AES/PHEAA's board of directors consists of members of the Pennsylvania General Assembly, the secretary of education, and gubernatorial appointees. The legislative members of the Board were successful in passing legislation that restructures the PHEAA Board of Directors, which was signed into law by the Governor on July 9, 2010.
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This legislation was based on a PHEAA Board resolution that called upon the General Assembly to replace legislative seats on the Board with private-sector individuals who could provide leadership expertise in an increasingly complex financial environment. Specifically, the legislation reduces the number of lawmakers serving on the 20-member Board from 16 to 12. The four legislative seats were replaced with private-sector professionals with experience in banking, investments and information technology; adding their expertise to the decisions that the Board makes on behalf of Pennsylvania students and families. The legislation also reduces the six-year Board term to four years.
Controversies and Criticisms
PHEAA has faced scrutiny and controversy over the years. In October 2007, Jack Wagner, the Pennsylvania auditor general, released a report accusing the agency of giving excessive bonuses and incentives. Rep. Bill Adolph, chairman of the agency's board, subsequently scheduled an emergency meeting of the board for Wednesday, October 10, to request the early resignation of the president of the agency, Richard E.
In 2007, former Department of Education researcher, Jon Oberlander, filed a False Claims Suit against PHEAA and other lenders. taxpayers of millions of dollars. In its defense, PHEAA argued that sovereign immunity protected it against False Claims Act suits.
On 8 January 2018, Massachusetts state's attorney general Maura Healey sued the company over its handling of the TEACH grant program and the larger Public Service Loan Forgiveness program.
Reviews dating back to 2015 found that PHEAA representatives lost track of loan payments and mistakenly told borrowers they were on track for forgiveness.
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Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness program was created in 2007 to encourage more students to enter low-paying public service professions. A story published last month in the New York Times described the program as a beacon of hope for workers laden with student loans.
Response to Criticism
Since 2007, PHEAA has undergone a series of reforms and cost-cutting initiatives including the elimination of management bonuses, automatic salary increases and all sponsorships and advertisements that were not in line with PHEAA's mission. The Board also instituted one of the nation's strictest business and travel expense reimbursement policies.
Financial Aspects
PHEAA’s operating costs are covered by revenue it earns as a loan servicer. The act signed by then-Gov. William Scranton included a $1.2 million appropriation to get the lending operation off the ground.
Recent Developments
In July 2021, PHEAA announced plans to stop servicing federal student loans and expects to lay off employees.
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