Biden admin withholds payments to student loan servicers over billing issues
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The U.S. Department of Education is withholding more than $2 million in payments to three student loan servicers for failing to send timely billing statements to borrowers.
Why it matters: Affected borrowers will go into forbearance until the issues are resolved, and so they will not owe payments in that time and any accrued interest will be adjusted to zero, the department said Friday.
- The time borrowers spend in administrative forbearance will count as progress toward Public Service Loan Forgiveness or income-driven repayment forgiveness, per the department.
Driving the news: The department found that servicers Aidvantage, EdFinancial and Nelnet failed to meet contractual obligations to send timely billing statements to a total of 758,000 borrowers for the first month of repayment.
- To hold the servicers accountable, the department is withholding payments of $2 million from Aidvantage, $161,000 from EdFinancial and $13,000 from Nelnet.
- The amounts are based on the number of borrowers impacted by the errors.
Meanwhile, the servicers were directed to place the affected borrowers into administrative forbearance.
What they're saying: The Biden administration "will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers," Secretary of Education Miguel Cardona said in a statement.
- "When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless," he warned.
Flashback: In October, the department withheld $7.2 million to servicer MOHELA after billing issues resulted in 800,000 borrowers missing payments.
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