The Biden administration is deducting over $2 million in payments from student loan servicers, namely Aidvantage, EdFinancial, and Nelnet, due to their failure to dispatch billing statements promptly after the conclusion of a pandemic-induced payment freeze.
The Education Department, citing contractual obligations, disclosed its decision on Friday, emphasizing its commitment to stringent oversight.
Over 750,000 borrowers experienced delays in receiving timely statements during the initial month of repayment, prompting this action.
Education Secretary Miguel Cardona asserted that the department would maintain rigorous scrutiny and not excuse poor performance by loan servicers.
Biden Administration Withholds Millions from Student Loan Servicers Over Billing Errors
This move is part of the administration’s ongoing efforts to rectify issues in the student loan repayment process that emerged when payments resumed in October, leading to billing statement inaccuracies and delays for many borrowers.
The department had previously retained $7.2 million from MOHELA, a loan servicer, due to its failure to dispatch statements on time to over 2.5 million borrowers.
The recent measure involves withholding $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet, determined by the count of borrowers affected by errors.
Nelnet responded, acknowledging that less than 0.04% of its borrowers experienced missing or delayed statements, with some opting to adjust their due dates for better alignment with their circumstances.
The Nebraska-based company expressed regret for any errors occurring during the unique circumstances surrounding the resumption of repayment.
Administrative Forbearance
Borrowers who did not receive statements within the mandated 21-day period before payment will be placed in administrative forbearance while the issues are addressed. During this period, their payments will be temporarily paused, and any accrued interest will be waived. Time spent in forbearance will continue to be counted for programs like Public Service Loan Forgiveness and other cancellations through income-driven repayment plans. (duckysonline.com)
Rich Cordray, the Chief Operating Officer of Federal Student Aid, the office overseeing federal student loans, stated, “We are committed to providing a seamless repayment experience for borrowers.”
Republicans argue that the Biden administration’s action is an attempt to shift blame for a disorderly return to repayment. Senator Bill Cassidy of Louisiana, the top Republican on the Senate Health, Education, Labor, and Pensions Committee, contends that the administration failed to provide clear guidance to servicers and has requested an investigation by the Government Accountability Office.
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