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I-Team: Borrower Complaints Mount Against Company That Handles Billing For MEFA Student Loans

BOSTON (CBS) - Tania Martins of Framingham was thrilled to learn she had been accepted to medical school in Alabama when she graduated from college. But the celebration did not last long.

Martins was devastated to learn she could not defer her undergraduate loans from Simmons College while she continued her education.

"I had to change my dreams," she said. "Obviously getting into med school is hard, but then having to cancel at the last minute because you can't fix your student loan issue."

Tania's loans are from the Massachusetts Education Finance Authority (MEFA), a self-funded quasi-state agency created by the legislature 35 years ago.

MEFA's website says its mission is to help families plan, save and pay for college. Along with college savings plans, the agency also offers private loans for about 140,000 borrowers.

But according to Adam Minsky, a Boston attorney who specializes in student loan issues, MEFA's loan terms create a lot of unhappy customers.

"Borrowers who have MEFA loans, in my experience, are some of the most distressed and unhappy student loan borrowers," he said.

The problem for many students and their parents borrowing from MEFA isn't just about terms that Minsky describes as "oppressive."

The I-Team discovered issues with the company that exclusively provides loan servicing for MEFA and other lenders across the country, a tally of roughly 1.7 million education loan accounts. The company is called Affiliated Computer Services (ACS), a subsidiary of Xerox.

"ACS, in my experience and the experience of a lot of other borrowers, is pretty terrible," Minsky said.

The WBZ I-Team found more than 500 complaints against ACS filed with the federal Consumer Financial Protection Bureau. Many of those complaints claim the company does not properly apply payments to pay down the principal.

That is exactly what happened to borrowers like Martins.

"When I look at my payment history, the numbers just don't match up," she said.

Martins shared her recent statement with WBZ. Her original loan was a fixed-rate loan, which is all that MEFA offers.

However, each month, the amount applied to principal and interest fluctuated wildly by hundreds of dollars.

"I feel like I'm never going to pay them off," she said.

A borrower from Londonderry, New Hampshire posted a similar complaint online.  According to his account, the loan started with a balance of about $46,000.  After paying $27,000 over a five-year period, the consumer claimed his balance had grown to $53,000.

"It's financial terrorism," he said in the post.

WBZ took questions about the complaints to MEFA's director of public affairs, Martha Savery.

WBZ also asked about a class-action lawsuit filed by a New York student in 2012 that alleged a "scheme to keep borrowers in debt." That case was settled out of court, federal court records show.

Savery would only acknowledge MEFA's exclusive relationship with ACS as its loan servicing provider.

"We hold our vendors to the highest standard and we will work with any family who reaches out with questions or concerns about their loan processing," she said.

ACS has seemingly also attracted scrutiny from the Massachusetts Attorney General's office.

When WBZ made a public records request for any consumer complaints against ACS, the agency did not provide the documents, citing an exemption for "investigatory materials" that could "compromise effective law enforcement."

A spokeswoman for the Attorney General did not confirm or deny an ongoing investigation.

Savery said MEFA was unaware of any interest from the Attorney General prior to the interview with WBZ.

When asked if that was concerning, Savery said MEFA will monitor the situation to see if any of its borrowers are affected.

"We hold our vendors to the highest level of accountability," Savery reiterated.

On Monday, an ACS parent company spokesman told the I-Team it had identified issues with the way some consumers had been billed. ACS will now update borrower accounts, the spokesman said.

"Any borrower whose account requires adjustment will be notified of these actions and no borrower will incur any extra costs on their loans," a statement said. "Xerox regrets any inconvenience these financial adjustments may cause, and will provide updates to all affected borrowers and lenders as the adjustments are completed."

Martins will wait to see if any corrections are made to her outstanding balance. Meanwhile, if she had to do it all over again, the Framingham resident now says she would have put off going to college and worked to save more tuition money.

"You won't be selling your soul to the devil, which is what I feel like I did," Martins said.

Ryan Kath can be reached at You can follow him on Twitter or connect on Facebook.

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