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Biden Administration Holds More Student Loan Servicers Accountable For Failures
Key Points
- The Department of Education penalizes Aidvantage, EdFinancial, and Nelnet for failing to send timely billing statements to 758,000 borrowers.
- Financial penalties include withholding payments totaling over $2 million from the servicers, with amounts proportionate to the number of affected borrowers.
- The Administration’s action includes protective measures for borrowers, like administrative forbearance and ensuring forbearance time counts towards loan forgiveness programs.
In a decisive move to uphold borrower rights, the Biden Administration, through the U.S. Department of Education, has announced punitive measures against three student loan servicers for contractual non-compliance.
This action underscores the Administration’s commitment to safeguarding student loan borrowers and ensuring servicer accountability.
Student Loan Servicer Accountability
The Department of Education has identified significant lapses by Aidvantage, EdFinancial, and Nelnet in meeting their obligations.
These student loan servicers collectively neglected to issue timely billing statements to approximately 758,000 borrowers during the first month of repayment.
Consequently, the Department is withholding a total of $2.174 million from these servicers, an amount reflective of the scale of the impact on borrowers. This works out to the following:
- $2 million withheld from Aidvantage
- $161,000 from EdFinancial
- $13,000 from NelNet
Other Protections For Borrowers
To mitigate the negative effects of these servicing errors, the Department has directed the servicers to place affected borrowers in administrative forbearance.
During this period, borrowers are exempt from payments, and any accrued interest is reset to zero. Importantly, this forbearance period will contribute towards qualifying months for loan forgiveness programs, such as the Public Service Loan Forgiveness or income-driven repayment plans.
Past And Ongoing Oversight
This intervention follows previous actions taken against MOHELA, which was penalized $7.2 million for similar contractual breaches affecting 2.5 million borrowers.
Federal Student Aid Chief Operating Officer Rich Cordray reiterated “We will not allow servicers to cause harm to borrowers as they resume making their monthly payments. We are committed to providing a seamless repayment experience for borrowers. We will continue our strong oversight and efforts to hold servicers to their contractual obligations and make sure borrowers are not harmed by these errors.”
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Editor: Ashley Barnett Reviewed by: Colin Graves
The post Biden Administration Holds More Student Loan Servicers Accountable For Failures appeared first on The College Investor.
