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Biden-Harris Administration Holds Student Loan Servicers Accountable for Not Meeting Contractual Obligations
The Biden-Harris Administration has announced that it will withhold payments from three student loan servicers as part of the ongoing efforts of the U.S. Department of Education to protect student loan borrowers and hold servicers accountable. The Department has found that Aidvantage, EdFinancial, and Nelnet failed to send timely billing statements to a total of 758,000 borrowers for the first month of repayment. As a result, the Department will withhold $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet, based on the number of affected borrowers.
According to U.S. Secretary of Education Miguel Cardona, “Today’s actions demonstrate that the Biden-Harris Administration will not excuse poor performance and mistakes by student loan servicers that put borrowers at risk. The Department of Education will continue to closely monitor servicers and prioritize the interests of borrowers. When we discover unacceptable errors, servicers should expect to be held accountable and borrowers can rely on this administration to protect them.”
To address the impact of these errors on borrowers, the Department has instructed each servicer to place affected borrowers into administrative forbearance until the issues are resolved. During this forbearance period, borrowers will not be required to make payments, and any accrued interest will be waived. Furthermore, any months spent in administrative forbearance will count towards Public Service Loan Forgiveness or income-driven repayment forgiveness. This action by the Department ensures that borrowers are not negatively affected by servicer errors and that the servicers are held responsible.
Previously, the Department withheld $7.2 million from MOHELA for failing to send billing statements or sending them late to 2.5 million borrowers.
The Federal Student Aid Chief Operating Officer, Rich Cordray, stated, “We will not allow servicers to harm borrowers as they resume their monthly payments. Our goal is to provide a smooth repayment experience for borrowers. We will continue to closely monitor and hold servicers accountable for meeting their contractual obligations and ensuring that borrowers are not affected by these errors.”
The Department remains committed to stringent oversight of servicers through its accountability framework, taking this responsibility seriously. These actions demonstrate the effectiveness of the oversight in identifying and rectifying mistakes. The Department will continue to monitor servicer performance to ensure compliance with contractual obligations and provide accurate and timely service to borrowers. If a servicer fails to meet these obligations, further action may be taken by the Department.
In an effort to prevent borrowers from being penalized for late or missed payments during the transition to repayment, the Department recently sent a letter to credit reporting agencies and credit scoring companies, reminding them that borrowers’ current payment behavior may not indicate an inability or unwillingness to make payments.