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Biden-Harris Administration Takes Additional Action to Hold Student Loan Servicers Accountable for Failing to Meet Contractual Obligations

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The Biden-Harris Administration today announced it is withholding payments to three student loan servicers as part of the U.S. Department of Education’s (Department) continued efforts to strengthen protections for student loan borrowers and hold servicers accountable. The Department has found that Aidvantage, EdFinancial, and Nelnet all failed to meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment. As a result of identifying these errors, the Department is withholding payment of $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet – amounts based upon the number of borrowers impacted by these errors.

“Today’s actions make clear that the Biden-Harris Administration will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers,” said U.S. Secretary of Education Miguel Cardona. “As millions of Americans return to repayment, the Department of Education will continue to engage in aggressive oversight of student loan servicers and put the interests of borrowers first. When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless.”

To remedy the impact of these errors on borrowers, the Department directed each servicer to place affected borrowers into administrative forbearance until the issues were resolved. While their loans are in administrative forbearance, borrowers will not owe payments and any accrued interest will be adjusted to zero. Additionally, any months that borrowers spend in administrative forbearance will count as progress toward Public Service Loan Forgiveness or income-driven repayment forgiveness. The Department’s action will ensure that borrowers are not harmed by these servicer errors and that servicers are held accountable for their actions.

The Department previously withheld $7.2 million from MOHELA for sending late or no billing statements to 2.5 million borrowers.

“We will not allow servicers to cause harm to borrowers as they resume making their monthly payments,” Federal Student Aid Chief Operating Officer Rich Cordray said. “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.”

The Department will continue its stringent oversight of servicers through our accountability framework and takes this responsibility very seriously. These actions show that the oversight has been effective in discovering mistakes when they happen, allowing the Department to take corrective action where needed. The Department will continue to monitor servicer performance and ensure they are meeting their contractual obligations to the Department and providing accurate and timely service to borrowers. If a servicer fails to meet these obligations, additional action may be warranted by the Department.

In addition, in an attempt to make sure borrowers are not 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 is not necessarily indicative of an inability or unwillingness to make payments.


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