Student loan servicing company settles fraud allegations for $7.9 million

by Ben Vernia | January 16th, 2022

On January 14, the Department of Justice announced that Conduent Education Services, LLC had agreed to pay $7.9 million to settle allegations that the company submitted false claims in connection with servicing federally funded student loans. According to DOJ’s press release:

Conduent Education Services LLC, fka 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. Prior to this settlement, CES paid $1.4 million to the Department of Education under a remediation plan to partially resolve the allegations and received a credit for that payment under the settlement agreement.

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. CES stopped servicing commercially held federal student loans in September 2019.

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The case apparently arose from a Department of Education investigation, rather than by a whistleblower’s lawsuit.

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