The $4,000 federal grant Megan Gammill received in 2012 to complete her master’s degree in education could not have come at a better time. She was working 20 hours a week at a day care center and another 20 hours as a nanny for a toddler with Down syndrome, all while attending the College of Charleston in South Carolina. Every dollar was stretched, and she had already amassed $31,000 in student loans.
Accepting the grant meant Gammill would have to work in a high-needs school or teach a high-needs subject for four years, and submit annual paperwork documenting her employment. Otherwise, her grant would be converted to a federal loan to be repaid with interest.
Everything went smoothly the first year she verified being a special education teacher at Parkdale High School in Riverdale, Md. But Gammill ran into problems after missing a signature on the certification form, resulting in her grant being turned into a loan in 2015.
What ensued was a two-year fight to reverse the decision, a battle that advocacy groups say is emblematic of the haphazard management of the Teacher Education Assistance for College and Higher Education Grant, widely known as TEACH. Numerous teachers have accused FedLoan Servicing, the company that oversees the program on behalf of the government, of converting grants in error and refusing to right the wrong. Now, Public Citizen, a consumer advocacy group, wants the U.S. Department of Education to disclose the full extent of the problem.
On Wednesday, the group sued the Education Department seeking the release of records on the federal TEACH grant. Public Citizen had filed a freedom of information request with the department in 2016 for documents and reports on the program. But attorneys say the agency has turned over only a portion of the files, providing an incomplete picture.
“We need documents to find out what does the department know about the process for disputes. What has it told its servicer to do? And what does it know about how many people have been affected by this?” said Julie Murray, an attorney at Public Citizen.
The Education Department declined to comment on pending litigation, while FedLoan referred all questions to the department.
Earlier this month, the Education Department released a study on the program that found 63 percent of recipients who began their service before July 2014 had their grants converted to loans. Of that population, 32 percent said they were on track to meet the program requirements or had already completed them, and so should not have been converted to a loan. The survey, however, failed to investigate why those recipients’ grants had been converted to loans.
A 2015 report from the Government Accountability Office has provided the most comprehensive look at the conversion problem. Researchers found 2,252 recipients had their grants mistakenly converted to loans from August 2013 through September 2014. During that time, FedLoan replaced ACS Education Services as the servicer for the program.
About 56 percent of the erroneous conversions occurred because the servicer failed to give recipients 30 days from the final notification to certify their employment, according to the GAO report. Most people had their loans revert to grants within six months and were refunded a total of $196,000. In the report, education officials assigned much of the blame to ACS, while FedLoan said it was manually reviewing all accounts flagged for conversion.
Records obtained by Public Citizen, however, show that erroneous conversions are far more widespread than the GAO found. One document provided by the Education Department indicates that FedLoan identified more than 15,000 grants that it suspected were converted in error by ACS. That amounted to 38 percent of all conversions, according to the document.
But it is unclear whether the problem has continued under FedLoan because the department has not turned over documents to Public Citizen on the servicer’s track record, Murray said. And she said the education agency is withholding information about its dispute process for erroneous conversions. That information could at least provide grant recipients a path toward resolution.
Gammill, 32, said it took dozens of calls with at least 24 FedLoan representatives to have her loan revert to a grant. She said she received conflicting information about the extension she had filed, and about correcting the error on her certification form and appealing the conversion. At one point, one employee told her there was no chance of rectifying the problem, even as another had filed a dispute on her behalf.
The converted loan was reported as a delinquent account on Gammill’s credit report because it appeared she had not made payments in two years — the time in which the loan was still considered a grant. Her credit score plummeted and plans to buy a house were shelved. To avoid falling into default, Gammill made payments on the loan while she fought the conversion. The added cost became too much to bear, so she asked her parents for a loan to pay off the debt.
“I realize that $4,000 is not a lot of money, but it’s also a lot of money and it financially crippled me,” said Gammill, who is in her fifth year at Parkdale. “I was paying rent, had a car payment, my student loan payment and I wasn’t making that much money.”
Fifteen months after her ordeal began, Gammill received word that her grant was converted in error and would be reinstated. It still took another four months before she was fully reimbursed the $5,000 she paid on the loan, which had a 6.8 percent interest rate. But her problems did not end there. When she tried to certify her employment for her fourth year of service, FedLoan rejected it because of a computer software glitch and concerns about a date listed on the form. The servicer eventually accepted the certification.
“I absolutely love my job. I love my students. I love teaching. But it is a stressful job and the population of kids I work with can be challenging, and this situation on top of all of that made my first four years of teaching so much harder than they needed to be,” Gammill said.
Problems in the TEACH grant program have garnered the attention of Massachusetts Attorney General Maura Healey, who is suing FedLoan over its management of the grants and another federal program providing loan forgiveness to public servants. Healey has accused the company of systematically converting grants to loans in error, a charge FedLoan has vehemently denied.
The company is also facing a class-action lawsuit from teachers who claim their grants were erroneously converted. They accuse FedLoan of trying to turn a profit because servicing loans for the government is more lucrative than servicing grants.
According to a 2014 contract, FedLoan is paid $1.05 for each recipient of a TEACH grant and $2.85 for each borrower repaying a student loan. Handling borrowers in deferment or forbearance and those who are delinquent is less lucrative for the company than servicing student loans — but, in most cases, it’s still more than the government pays for the grant program.