Three student loan servicers will lose up to $2 million in payments after failing to send student loan billing statements to 758,000 borrowers, the Education Department said Friday.
The DOE said that Aidvantage, EdFinancial and Nelnet, companies that help manage the federal government’s student loan portfolio, will face the pay cuts after complaints of inaccurate bills and poor customer service.
According to The Washington Post, it is the second time since the loan repayment restart that the federal government has punished a loan servicer for poor service.
“The Biden-Harris Administration will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers,” Education Secretary Miguel Cardona said in a statement Friday. “When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless.”
According to The New York Times, servicers were supposed to give borrowers at least 21 days’ notice before their first bill was due, but almost all of the contractors missed that deadline.
The agency said Aidvantage lost $2 million from its contract after it failed to mail out timely statements to 697,734 of the borrowers whose loans it services. EdFinancial stands to lose $161,410 for failing to send 55,674 people their bills on time, while Nelnet will lose $13,382 for failing to get bills out to 4,616 borrowers, the federal agency said.
In October, the department withheld $7.2 million from Missouri Higher Education Loan Authority, commonly known as MOHELA, for not sending 2.5 million borrowers statements on time, the Post reported.
Of the 2.5 million borrowers whom MOHELA services, more than 800,000 missed their first full payment and became delinquent.
It is not clear if the delinquent payments were from notices failing to go out or other issues.
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