Education Department withholds $2.1M in payments to 3 loan servicers

Jan. 5 (UPI) -- The Education Department said on Friday it plans to deny payments of more than $2.1 million to three student loan servicers for failing to send off billing to borrowers in a timely manner.

The Education Department said Aidvantage will not receive $2 million in payments, EdFinancial will have $161,000 withheld and Nelnet will be denied $13,000 based on the number of borrowers impacted by their errors, which it said totaled about 758,000.

"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," Education Secretary Miguel Cardona.

"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."

Education officials directed the three servicers to move the affected borrowers into forbearance where they will stay until the issues around the slow billing can be settled.

"We will not allow servicers to cause harm to our borrowers," Rich Cordray, federal student aid chief operating officer, said in a statement. "We are committed to providing a seamless repayment experience for our borrowers."

The announcement is part of the Biden administration's continued crackdown on loan servicers and its treatment of student borrowers.

In October, the Education Department withheld $7.2 million in payments to the Missouri Higher Education Loan Authority for not sending out bills on a timely basis, forcing thousands of its borrowers to become delinquent on their loans.

The department also told MOHELA to put all borrowers affected by the slow billing in forbearance until the situation is fixed.