The Department of Education on Friday announced it is withholding nearly $2.2 million from three student loan servicers for failing to meet their contractual obligations and send statements to 758,000 borrowers in a timely manner.
What Happened: Three servicers — Aidvantage, EdFinancial, and Nelnet — each had payments withheld. The Department of Education is withholding $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet.
Not the First Time: This is the second time that the Department of Education has withheld funds from servicers since the student loan payment moratorium ended in October. Back in November, the Higher Education Loan Authority of the State of Missouri, or MOHELA, had $7.2 million in payments withheld because it failed to send statements in a timely manner to 2.5 million borrowers.
What Happens Next: The three servicers were directed to place affected borrowers into administrative forbearance programs until the issues with the statements are resolved. This means that the affected borrowers will not owe any payments and the loans will not accrue any interest. Any months that the borrowers spend in administrative forbearance will count as progress toward Public Service Loan Forgiveness or income-driven repayment forgiveness, the DoE announced.
The Last Word: “We will not allow servicers to cause harm to borrowers as they resume making their monthly payments,” Federal Student Aid Chief Operating Officer Rich Cordray said. “We are committed to providing a seamless repayment experience for borrowers. 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.”