Dive Brief:
- The U.S. Department of Education said Friday it is withholding almost $2.2 million in payments to three student loan servicers because they failed to send 758,000 customers timely billing statements.
- The bulk of the money, $2 million, is being kept from contractor Aidvantage. The department is also withholding $161,000 and $13,000 from two other student loan servicers, EdFinancial and Nelnet, respectively.
- The Education Department has directed each company to put affected loan accounts into administrative forbearance until they fix the issues. Borrowers won't owe payments or accrue interest, but this time will still count toward Public Service Loan Forgiveness or income-driven repayment forgiveness, the agency said.
Dive Insight:
For over three years, the federal government paused monthly student loan payments and interest accrual, citing the COVID-19 pandemic. Since payments restarted in October, many customers have said they faced administrative challenges and received little communication from loan service providers.
The Education Department announced in October that it was withholding a $7.2 million payment from the Missouri Higher Education Loan Authority over similar billing issues.
With its latest round of punitive action, the department has now held payments from four of the six loan servicers with which it contracts.
“We will not allow servicers to cause harm to borrowers as they resume making their monthly payments,” Rich Cordray, chief operating officer of the Education Department's Federal Student Aid office, said in a statement Friday. “We are committed to providing a seamless repayment experience for borrowers."
