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Student loan borrowers have experienced billing errors and long waits to get hold of the companies managing their loans since payments restarted in October, the Consumer Financial Protection Bureau said in a new report released Friday.
“The resumption of student loan payments means that borrowers are making billions of dollars of payments each month,” CFPB director Rohit Chopra said in a statement. “If student loan companies are cutting corners or sidestepping the law, this can pose serious risks to individuals and the economy.”
Borrowers who have sought to enroll in an income-driven repayment plan, which could reduce their monthly payments, have seen processing delays. The companies that manage federal student loans had more than 1.25 million pending applications as of late October. Those delays can “put borrowers at risk for making significantly higher payments than they can afford,” the CFPB said in the report.
Also on Friday, the Education Department announced it was withholding $2.17 million in payments for three of the companies that manage student loans. The companies, the department said, failed to send timely billing statements to 758,000 borrowers for the first month of repayment. This is the second time the department has withheld payments to student loan servicers since payments resumed.
The department is withholding $2 million from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet. Those figures are based on the number of borrowers affected by these errors, according to the news release. Affected borrowers will have their accounts placed in an interest-free forbearance, so they won’t have to make payments until the issue is resolved.
“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,” U.S. Secretary of Education Miguel Cardona said in a statement. “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. When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless.”
