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.
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.
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?
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 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:
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.
Start by using your existing networks to provide the information and support your former students need to successfully repay their student loans.
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.
Contact us to learn how we can help your borrowers.