Biden-Harris Administration Holds Student Loan Servicers Accountable for Billing Errors

The Biden-Harris Administration has taken decisive action to withhold payments from three student loan servicers – Aidvantage, EdFinancial, and Nelnet – following their failure to meet contractual obligations. The U.S. Department of Education, under Secretary Miguel Cardona, is committed to protecting student loan borrowers and ensuring accountability in the servicer industry.

The Department discovered that these servicers collectively failed to send timely billing statements to 758,000 borrowers during the first month of repayment. To address this issue, the Administration is withholding payments amounting to $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet. These amounts reflect the number of borrowers impacted by the errors.

U.S. Secretary of Education Miguel Cardona emphasized that the Administration will not tolerate poor performance from student loan servicers. The Department’s aggressive oversight aims to prioritize the interests of borrowers, holding servicers accountable for any missteps.

To mitigate the impact on affected borrowers, the Department has directed each servicer to place them into administrative forbearance until the issues are resolved. During this forbearance period, borrowers won’t owe payments, and accrued interest will be adjusted to zero. Notably, months spent in administrative forbearance will count toward Public Service Loan Forgiveness or income-driven repayment forgiveness.

This is not the first time the Department has taken such action. Previously, $7.2 million was withheld from MOHELA for late or absent billing statements to 2.5 million borrowers. The Federal Student Aid Chief Operating Officer, Rich Cordray, affirmed the commitment to providing a seamless repayment experience for borrowers and maintaining strong oversight to prevent harm.

The Department’s accountability framework has proven effective in identifying mistakes and facilitating corrective action. Continuous monitoring of servicer performance is a top priority, ensuring they meet contractual obligations and provide accurate and timely service to borrowers. Any failure to meet these obligations may result in additional actions by the Department.

In a further effort to protect borrowers during the transition to repayment, the Department has communicated with credit reporting agencies and credit scoring companies. The letter reminds them that current payment behavior may not reflect borrowers’ inability or unwillingness to make payments, aiming to prevent penalties for late or missed payments during this critical period.