Federal student loan borrowers are facing difficulties as they resume payments post-pandemic, with issues such as long hold times, processing delays, and inaccurate billing. The Consumer Financial Protection Bureau (CFPB) has highlighted these challenges and the Education Department is taking action against servicers failing to meet obligations, including withholding payments. The Biden administration's attempt to cancel up to $20,000 in student debt was blocked by the Supreme Court, adding to the complexity of the situation. The Education Department's recent actions underscore its commitment to protecting borrowers and ensuring servicers are held accountable for their performance.
The restart of federal student loan repayments has been marred by significant issues, including late bills, incorrect billing statements, and excessively long customer service wait times. The Education Department penalized its loan servicers for these failures, with Aidvantage, Nelnet, and EdFinancial facing financial penalties based on the number of affected borrowers. The Consumer Financial Protection Bureau highlighted a backlog in processing applications for the new income-driven payment plan, SAVE. Education Secretary Miguel Cardona assured that borrowers with late bills would not owe payments or incur interest during administrative forbearance, which counts towards loan forgiveness programs. Loan servicers and consumer advocates have expressed concerns over the rocky resumption process and the need for better solutions, including calls for student debt cancellation.
The U.S. Education Department is penalizing three loan servicing companies for failing to send timely billing statements to an additional 758,000 student loan borrowers, adding to the 2.5 million borrowers previously affected. The companies, Aidvantage, EdFinancial, and Nelnet, will face financial penalties and affected borrowers will not accrue interest or be required to make payments until the issues are resolved. This comes amid a challenging restart to federal student loan payments after a pandemic-induced pause, and coincides with a Consumer Financial Protection Bureau report on backlogs in processing applications for Biden's new loan repayment program. The Education Department's actions reflect a commitment to holding servicers accountable for their contractual obligations.
The Biden administration is penalizing student loan servicers Aidvantage, EdFinancial, and Nelnet by withholding over $2 million in payments due to their failure to send timely billing statements to borrowers after the end of the pandemic payment freeze. This action follows a previous $7.2 million withholding from MOHELA for similar issues. The servicers' errors affected over 750,000 borrowers, who will now be placed in administrative forbearance to resolve the issues without penalties. The Education Department is also working on a new student loan cancellation proposal after the Supreme Court rejected the initial plan.
The Biden administration is penalizing student loan servicers Aidvantage, EdFinancial, and Nelnet by withholding over $2 million in payments due to their failure to send timely billing statements after the end of a pandemic payment freeze. The servicers' errors affected over 750,000 borrowers, and this follows a previous $7.2 million withholding from MOHELA for similar issues. Borrowers affected by late statements will be placed in administrative forbearance, and the Education Department is working on a new proposal for targeted student loan cancellation after a previous plan was rejected by the Supreme Court.
