Three of the nation’s largest student loan servicers are facing fines from the Biden administration. This comes after they failed to send timely bills to 758,000 borrowers during the return to repayment last fall.
The government fined the first servicer Aidvantage, as part of a larger effort to hold student loan companies accountable and ease the already-messy return to student loan repayments.
They’re withholding payment of $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet. They estimated these amounts based on the number of borrowers affected by the servicers’ lapses.
Therefore, the affected borrowers will get some degree of administrative forbearance for a certain period. During this period, the borrowers won’t need to make payments and will not incur any interest or additional fees.
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Biden’s administration had no choice but to penalize these agencies as they have made several mistakes over the years. It shows that they are error-prone, and their performance is not up to par.
The U.S. Secretary of Education, Miguel Cardona, said in a statement, “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.”
He continued, “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.
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When unacceptable errors are uncovered, servicers should expect to be held accountable, and borrowers should count on this administration to hold them harmless.” However, the student loan services believe this situation is not their fault. They blame the educational department for all the current mishaps.
According to the executive director of the Student Loan Servicing Alliance, Scott Buchanan, these servicers warned the department earlier that there were several problems on ground.
Therefore, these fines are indicative of the problems. He also said that the penalties would only hurt borrowers’ customer experience. “They’ve under-resourced this entire resumption effort,” he said. “These are all things we’ve been telling the department and the bureau would happen.”
These three servicers aren’t the first to feel the wrath of the Biden administration. Last October, the department took similar steps to penalize MOHELA, which was at the center of the litigation challenging Biden’s mass loan forgiveness plan.
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The officials had a stricter punishment and had $7.2 million withheld from them. This was after the servicer failed to send out on-time billing statements, resulting in more than 800,000 borrowers being delinquent on their loans.
Furthermore, the Education Department recently issued a letter restating its commitment to making the lives of borrowers easier. “We will not allow servicers to cause harm to borrowers as they resume making their monthly payments,” said Rich Cordray, chief operating officer of Federal Student Aid, in a statement.
“We are committed to providing a seamless repayment experience for borrowers.” He concluded, “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.”
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