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Pennsylvania Higher Education Assistance Agency - One of Nation's Largest Student Loan Servicers - Should Not Be Immune From Consumer's Lawsuit
Representing Virginia Student, Public Citizen Appeals to Fourth Circuit
WASHINGTON
The Pennsylvania Higher Education Assistance Agency (PHEAA) - one of the nation's largest student loan servicers - should not be immune from suit for violating the Fair Credit Report Act, Public Citizen told the Fourth U.S. Circuit Court of Appeals today in a brief.
The outcome of the case could affect the legal remedies available to thousands of student borrowers and their families. Little case law exists addressing the question of whether most state loan guarantee agencies have "sovereign immunity" - that is, whether they are treated like states themselves and are therefore immune from lawsuits seeking damages for any type of wrongdoing.
In 2013, Fairfax County, Va., resident Lee Pele sued PHEAA under the federal Fair Credit Reporting Act, alleging that PHEAA had failed to correct inaccurate reports stating that Pele had defaulted on tens of thousands of dollars in student loans - loans that were not, in fact, his. PHEAA sent those erroneous reports to credit agencies, threatening to hamper Pele's plans to finish graduate school and buy a home.
A district court in October found that PHEAA was immune from suit because it is an arm of the state. Public Citizen is representing Pele in the appeal.
Scott Michelman, the Public Citizen attorney representing Pele, explained, "This case is about holding a major financial corporation accountable for its actions. PHEAA does more than $100 billion worth of student-loan business. The fact that PHEAA is affiliated with a state should not entitle it to operate with impunity."
In addition to Pele's lawsuit, PHEAA is defending a separate case claiming that it defrauded the federal government and another case claiming that it violated its employees' rights under federal and state wage-and-hour laws. In each of these cases, PHEAA has asserted that sovereign immunity requires dismissal.
"For my generation, student loans are such a big part of our lives, so it's unfathomable that this huge loan agency wouldn't be responsible when they make mistakes that affect borrowers' lives so significantly," said Pele, 28, who is finishing his MBA at George Mason University. "I never want anyone else to experience what I did - having my credit history marred by debts that aren't mine and to have to put my life on hold."
PHEAA was created in 1963 by the Pennsylvania Legislature. In 2008, it stopped lending directly to students; now it primarily services and guarantees loans for students nationwide. It also operates under the names American Education Services and FedLoan Servicing.
Although it was established by the state, it does not meet the legal test for being an arm of the state, Public Citizen argues, because:
- PHEAA's operations are financially independent of state funding;
- The state is not legally or functionally liable for a judgment against PHEAA;
- More than two-thirds of PHEAA's loan guarantee and loan servicing businesses (which together account for more than 90 percent of PHEAA's business) consist of non-Pennsylvania loans;
- PHEAA's own legal filings in 2010 and 2011 identified it as a "citizen of Pennsylvania," a status that is legally incompatible with being an arm of the state;
- The Fourth Circuit in United States ex. rel. Oberg v. PHEAA held earlier this year that PHEAA was not an arm of the state.
Hugo Blankingship and Tom Christiano of Blankingship & Christiano in Reston, Virginia, represented Pele in the trial court and are co-counsel with Public Citizen on the appeal.
Read the brief and learn more about the case.
Public Citizen is a nonprofit consumer advocacy organization that champions the public interest in the halls of power. We defend democracy, resist corporate power and work to ensure that government works for the people - not for big corporations. Founded in 1971, we now have 500,000 members and supporters throughout the country.
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Trump Weighs Ultimate Gift to For-Profit Insurance Industry: Medicare Privatization
"They want to remove the guarantee of Medicare," one advocate said of the Trump administration's floated plan to automatically enroll seniors in Medicare Advantage.
Apr 10, 2026
The Trump administration is considering enacting a policy that would automatically funnel seniors into for-profit Medicare Advantage plans—which critics say would set Medicare on the path to full-scale privatization.
Chris Klomp, the Trump administration's director of Medicare and deputy administrator of the Centers for Medicare and Medicaid Services (CMS), told STAT last month that enrolling seniors in Medicare Advantage (MA) plans by default "is something that we're thinking through." MA plans are funded by the federal government and run by private insurance companies such as UnitedHealthcare and Humana, both of which have been accused of improperly denying necessary care to patients and overcharging taxpayers.
The default enrollment scheme was floated in the far-right Project 2025 agenda that President Donald Trump has repeatedly tried to disavow. Currently, older Americans who have received Social Security benefits for at least four months before they turn 65 are automatically enrolled in traditional Medicare, and they can choose to enroll in an MA plan as an alternative.
"Another bad idea straight from Project 2025," Rep. Mark Pocan (D-Wis.) said in response to Klomp's comments on the proposed default enrollment change. "Medicare Advantage is private, for-profit insurance that overcharges American taxpayers by billions every year and regularly denies seniors the care they need."
"Making Medicare Advantage the default option hurts patients and taxpayers," Pocan added, "but it will make insurance execs a lot of money."
"With Mehmet Oz running the agency, they can move incredibly quickly to make that happen, and they are."
Klomp said no plans have been finalized, but defenders of traditional Medicare warned that CMS—headed by Mehmet Oz, who during his 2022 US Senate run backed a plan entitled "Medicare Advantage for All"—could try to swiftly ram the change through without public input.
"With Mehmet Oz running the agency, they can move incredibly quickly to make that happen, and they are," Alex Lawson, executive director of the progressive advocacy group Social Security Works, told Common Dreams on Friday. "They will not explain it to the people, because the people hate the idea. Instead, they say 'change the default option' and other policy jargon to try and hide the fact of what they are doing, privatizing Medicare."
"They want to remove the guarantee of Medicare," warned Lawson, "and replace it with the same private insurance giants that make billions denying healthcare, especially to those who need it the most."
Experts say making Medicare Advantage plans the default enrollment option for seniors would likely decrease traditional Medicare enrollment dramatically.
Given massive overpayments to Medicare Advantage plans—potentially $1.2 trillion over the next decade, according to one independent estimate—a large increase in MA enrollment would be sure to drive up costs and monthly premiums across the board. A report released last month by the congressional Joint Economic Committee estimated that MA overpayments led to premium hikes of $212 per Medicare Part B enrollee last year.
"Since 2016, MA overpayments have added an estimated $82 billion to Part B premiums," the congressional report found. "[Traditional Medicare] beneficiaries, who are not enrolled in MA, bore roughly $6 billion of that burden."
Under one scheme floated last year by Rep. David Schweikert (R-Ariz.), eligible Medicare recipients would be automatically enrolled in the "MA plan with the lowest premium available," unless they actively decide to opt out. Once enrolled in an MA plan, individuals would be unable to switch plans for three years.
Wendell Potter, a former health insurance executive who now champions Medicare for All, warned Friday that under Schweikert's plan, "seniors would be locked in a plan that the government chose for them, that has a limited network of doctors and hospitals, that makes them pay the entire bill for services they might receive outside of that network, and that denies coverage for medically necessary care far more than traditional Medicare—for three years."
In addition to weighing the default enrollment change, the Trump administration has recently delivered smaller-scale but significant victories to MA insurers, including by boosting federal payment rates—bowing to a massive industry lobbying blitz—and easing rules around the marketing of MA plans.
David Lipschutz, co-director of law and policy at the Center for Medicare Advocacy, said Thursday that the latter move represents "a rollback of consumer protections, which gives in to pressures from the insurance industry and those who sell their products."
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‘Disgusting’: Trump’s Top Economic Adviser Brags About Killing 300,000 Americans' ‘High-Paying’ Jobs
"Everybody is hurt by what he's celebrating," one public employee union official told Common Dreams. "I guess it's just par for the course from this administration, but it's still a disgusting thing to hear."
Apr 10, 2026
President Donald Trump's top economic adviser boasted on Fox Business Thursday that the government had slashed more than 300,000 "high-paying" jobs from the federal payroll during the president's first year back in office.
Asked by anchor Maria Bartiromo about the administration's efforts to cut government spending, National Economic Council Director Kevin Hassett said it had made "a huge amount of progress."
"I think the biggest thing that we can point to is that we've cut government employment by 300,000 workers," he said. "Those are jobs that are very high-paying that are gone forever."
He claimed the cuts reduced government spending by "an unthinkable amount of money," perhaps $1 trillion over the next ten years.
He also said that the administration "reduced the deficit last year by $600 billion" through a combination of higher-than-expected economic growth, tariff revenues, and "supply side effects" of Trump's massive tax cut, which mostly benefited the wealthiest Americans while gutting the social safety net.
Dean Baker, a longtime collaborator of Hassett’s despite their opposing political beliefs, wrote on social media that Trump’s economic adviser was dramatically exaggerating the deficit reduction that occurred during the administration's first year.
According to the Congressional Budget Office (CBO), the deficit was about $1.8 trillion for fiscal year 2025, just $41 billion less than the previous year and $56 billion lower than the $1.9 trillion deficit CBO projected in its most recent baseline.
"In the real world, the deficit fell... less than one-tenth of what Kevin claims," Baker said.
Trump has touted the layoffs of hundreds of thousands of government employees from their "boring federal jobs" as one of his crowning achievements.
Among the agencies hit by mass layoffs were the Department of Veterans Affairs, where more than 12,700 employees got the axe; the Department of Health and Human Services, which lost more than 14,400 workers; the Social Security Administration, whose staff shrank by more than 6,600; and the Environmental Protection Agency, which lost more than 4,000 employees.
Jacqueline Simon, policy director at the American Federation of Government Employees (AFGE), the largest labor union representing federal workers, told Common Dreams that even if slashing jobs did reduce the deficit as Hassett claimed, the harm far outweighs any such benefit—not only for the fired employees, but for the millions of Americans who depend on services they provide.
"When you say 300,000 jobs, it is a nice round number, and you link it to deficit reduction, which he was lying about," Simon said. "The fact of the matter is, the disappearance of those 300,000 jobs means degraded healthcare for our veterans; slower or nonexistent service at the Social Security Administration for the elderly and disabled who rely on Social Security for their income; and the elimination of huge swaths of the Environmental Protection Agency (EPA) that help ensure we have clean air to breathe and clean water to drink."
"You have federal prisons absolutely overwhelmed by too many inmates and too few corrections officers, endangering public safety," she continued. "Consumer product safety has been eviscerated. There are also serious public health concerns involving substance abuse, childhood nutrition, and vaccinations."
She decried Hassett's comments as "ignorant" in light of his false claims about deficit reduction, but also "just demonstrably pretty cruel and disdainful" given the impact these job losses have on individuals, families, communities, and society as a whole.
"It's cruel," Simon said, "not only on the people who held those jobs—about a 100,000 of whom are military veterans—but the impact of the disappearance of those jobs also falls on children, the elderly, anybody who consumes agricultural products, breathes air, or relies on clean water."
"Everybody is hurt by what he's celebrating," she added. "I guess it's just par for the course from this administration, but it's still a disgusting thing to hear."
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‘America’s Not OK’: Surveys Show US Wellbeing in Steep Decline Under Trump
"Americans are drowning under rising costs, flat wages, high unemployment, and historic layoffs—it’s no wonder they’re concerned about how they’re going to make ends meet."
Apr 10, 2026
Two recently released surveys revealed a significant drop in Americans' self-reported wellbeing as the Trump administration launches illegal and deadly military conflicts and plunges the global economy into chaos.
On Friday, the University of Michigan issued its monthly Survey of Consumers, which showed that consumer sentiment in the US hit an all-time low after dropping by 11% since March, amid President Donald Trump's war of choice in Iran.
The drop in consumer sentiment was almost universal, the survey found, as "demographic groups across age, income, and political party all posted setbacks in sentiment, as did every component of the index, reflecting the widespread nature of this month’s fall."
As for the reasons for the decline, the survey found "many consumers blame the Iran conflict for unfavorable changes to the economy," such as a major spike in gas prices, which the US Bureau of Labor Statistics reported on Friday increased by more than 20% in the month since the war began.
Heather Long, chief economist at Navy Federal Credit Union, noted that the latest consumer sentiment data showed Americans are even more sour on the economy now than they were in the summer of 2022, when the economy was dealing with the highest inflation it had seen in decades.
Kendall Witmer, rapid response director of the Democratic National Committee, seized on the consumer sentiment report and accused Trump of having "tanked the economy for working families."
"Americans are drowning under rising costs, flat wages, high unemployment, and historic layoffs," Witmer added. "It's no wonder they're concerned about how they’re going to make ends meet and Trump and [Vice President] JD Vance can’t be bothered to make life more affordable for them."
The record low in consumer sentiment comes just weeks after Gallup released its annual World Happiness Report, which showed that the US had fallen out of its rankings of the 20 happiest countries in the world.
The report says the decrease in US happiness largely came from "lower life evaluations among young adults," and points the finger at high social media use as a key factor in making young people miserable.
Specifically, the report finds "there is now overwhelming evidence of severe and widespread direct harms (such as sextortion and cyberbullying), and compelling evidence of troubling indirect harms (such as depression and anxiety)" from social media use, adding that "the harms and risks to individual users are so diverse and vast in scope that they justify the view that social media is causing harm at a population level."
Social media's impact on mental health has come into focus in recent weeks with juries in multiple states finding Big Tech companies liable for creating products that harm children.
In March, a New Mexico jury found social media giant Meta liable for harming children's mental health and safety, ordering the company to pay $375 million. A day later, a Los Angeles jury ordered Meta and Google to each pay $3 million in civil damages to a now-20-year-old woman who alleged harm and suffering caused by their products when she was an adolescent.
Journalist Derek Thompson took stock of the Gallup survey and the University of Michigan survey, as well as last year's General Social Survey that also documented a decline in US happiness, and declared, "America is not OK."
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