Student Loan Borrowers Face Missing and Inaccurate Bills

Posted 12/12/2023

When student loan repayment restarted in October, many borrowers got an unwelcome surprise. Servicing errors resulted in missing, late, or inaccurate bills for millions. To make matters worse, affected borrowers ran into extremely long hold times when seeking help from their loan servicer or Federal Student Aid (FSA).

The problems were caused largely by volume. Over 30 million borrowers began repayment at the same time. That’s far more than the federal student loan system was equipped to handle. Given those conditions, mistakes are inevitable.
In response, the U.S. Department of Education (ED) has assured borrowers they’ll be protected from any financial damage caused by the errors. They’ve also taken steps to fix the errors.

This article covers exactly what went wrong, what ED has done to address the problems, and what your borrowers can do if they’re the victim of a servicing error.

Missing and Late Billing Statements

Borrowers were promised they’d receive a billing statement at least 21 days before their first payment was due. At least 2.5 million received their statements late or didn’t get them at all. Many missed their first payment and were reported as being delinquent on their loans.

Inaccurate Monthly Payments

An unknown number of borrowers were sent the wrong monthly payment amount. While there were several different reasons, they have one thing in common: use of inaccurate data to calculate payments.

Who was affected by these errors?

Borrowers who switched from REPAYE to SAVE – Within the last few months, millions of borrowers were automatically transferred from the old REPAYE Plan to the new SAVE Plan. That required their monthly payments to be recalculated. In many cases, servicers used old or inaccurate income data resulting in inflated monthly payments.
Borrowers on an Income Driven Repayment (IDR) plan – The “federal poverty guideline” is an official figure that changes from year to year and is used to calculate payments for IDR plans. At least 280,000 borrowers were sent a higher payment after their servicer used the guideline from 2022 instead of 2023.
Borrowers applying for defense to repayment – Borrowers who had pending borrower defense to repayment discharge applications were moved from forbearance to active repayment status and sent a monthly bill.

In addition, some borrowers received the wrong monthly payment because their servicer used the wrong repayment plan or length of repayment to determine the amount.

ED Takes Action

ED has already enacted several decisive measures to protect borrowers. Loan servicers must notify any borrower hurt by the errors and place them in a retroactive administrative forbearance. This shields them from any negative impact the errors may have on their student loan accounts.

Servicers also must:

Offer to refund any recent payments made by affected borrowers.
Pay any non-sufficient fund (NSF) fees caused by automatic withdrawals.
Reprocess IDR applications for borrowers using the correct family size, household income and spousal loan information contained in the file and send these borrowers new IDR disclosures with the revised monthly payment amount.

In addition to protecting borrowers, ED has also penalized one of the loan servicers for its failure to notify 800,000 of their upcoming payments.

How to Help Your Student Loan Borrowers

Start by using your existing networks to provide the information and support your former students need to successfully repay their student loans.

Provide consistent and accurate information to borrowers. As a trusted resource, schools play a critical role in helping former students stay up-to-date on the changing news and rules surrounding repayment. You should be doing this right now.
Reinforce the importance of keeping contact information up to date. The only way for you and loan servicers to keep borrowers informed and help them is if you can reach the borrower.
Make sure borrowers are in the right repayment plan. Now is the time for borrowers to check in with their servicers and determine if their monthly payment will be affordable. If not, they should consider applying for an income-driven repayment plan now.

Enlist the Help of a Trusted Partner

Many schools simply don’t have the staff or capacity to provide borrowers with critical updates. Effective outreach requires a multi-channel communication strategy. This is where having a default prevention outreach partner can help.

Student Connections supports over 8 million borrowers on the behalf of more than 550 campuses. We use a combination of phone calls, emails, text messages, social media posts, live chat and chatbot to connect former students with the information they need to succeed.

We also take time to personally counsel borrowers who have questions or are seeking to better understand their repayment options. Our experienced team of borrower advocates provided counseling to more than 700,000 borrowers throughout the entire payment pause.