Student Loan Servicer Announces Staff Reduction

Posted 1/25/2023

The federal loan servicer Nelnet has announced the layoff and/or termination of more than 550 of its employees.

Nelnet Cuts Staffing Capacity in Student Loan Servicing Division

Nelnet had been staffing-up in anticipation of unprecedented levels of borrower activity once the Biden-Harris student loan debt relief plan rolled out and monthly student loan payments resumed.

Instead, debt relief was delayed by legal challenges, and the payment pause was extended one more time. The company found itself overstaffed.  Over half the affected workers were hired within the last six months.

Behind the Layoffs: A Moving Target

Nelnet’s move isn’t surprising. Federal student loan servicers are paid a fixed dollar amount per loan, based on status, each month. As long as the payment pause is active, their ability to generate revenue is limited.

The cycle of hiring and firing has been driven by the repeated extension of the payment pause. The Department of Education (ED) has announced eight separate end dates since March 2020. On more than one occasion they’ve declared it “the last extension.”

Individually, each extension is explicable. In combination, they create a moving target. Servicers know the resumption of payments will unleash a tidal wave of borrower activity unlike anything they’ve ever dealt with. They staff-up in preparation, only to have the date moved again.

Without the revenue that comes from working active accounts, servicers cannot afford to pay the number of staff needed to support repayment resumption when the payment pause continues to get extended.

Prepare Borrowers for the Challenges Ahead

Uncertainty surrounds repayment resumption and debt relief, but it’s imperative schools take action now to prepare borrowers for the challenges ahead.

Now, more than ever, your borrowers need consistent and accurate information from their school, servicer, and Federal Student Aid (FSA). Tell your borrowers to:

• Sign up for alerts from ED and FSA.
• Keep their contact information up-to-date with their loan servicer.
• Find the right repayment plan now.
• Avoid student loan scams.

You have to wait for the Supreme Court to rule on debt relief and ED to declare a final end to the payment pause, but you can help your former students right now.