States Target Student Loan Forgiveness Foot-Dragging

A prominent U.S. Department of Education loan contractor became the latest target of a broadening enforcement effort by state attorneys general Wednesday. Massachusetts sued the Pennsylvania Higher Education Assistance Agency, which does business as FedLoan Servicing, for allegedly bungling a decade-old federal program at the expense of low-paid, highly indebted government and nonprofit workers.

The Public Service Loan Forgiveness program pledges to erase unpaid student debt after 10 years of payments. Enacted in 2007, it was meant to encourage college graduates to pursue critical though low-paying public interest careers such as public defender, teacher, or social worker. About two-thirds of the 612,000 participants took out more than $50,000 to pay for college or graduate school, according to federal data. Two-thirds of participants ended up taking jobs paying less than $50,000 a year.