Delayed statements, incorrect bills: What student loan borrowers need to know about servicing problems

Personal Finance

Student loan borrowers report spending hours on hold trying to contact their loan servicers.
Laylabird | E+ | Getty Images

Borrowers have been plagued by problems since the restart of student loan payments in the fall.

The U.S. Department of Education said at the end of October that student loan servicer Mohela, or the Missouri Higher Education Loan Authority, failed to send timely billing statements to 2.5 million borrowers.

As a result of Mohela’s errors, more than 800,000 borrowers had become delinquent, the Education Department reported.

Then just last week, the department announced that three additional student loan servicers — Aidvantage, EdFinancial and Nelnet — “all failed to meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment.”

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The Consumer Financial Protection Bureau has found that borrowers are waiting more than an hour, on average, trying to reach their student loan servicers on the phone. Meanwhile, borrowers’ requests to change payment plans are often stuck pending for more than 30 days with no resolution.

“Servicers are overwhelmed and are failing to help struggling borrowers navigate the options that are available to them,” said Persis Yu, deputy executive director at the Student Borrower Protection Center.

In comments to CNBC after the Education Department’s January announcement, Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, blamed the errors on a lack of resources and notice from the government.

“Time and effort spent by Federal Student Aid and the CFPB on their press strategy would be better put to use in trying to solve the actual problems by coordinating on advocating for more resources and executing better operational planning by the government,” Buchanan said.

Here’s what borrowers should know about the servicer problems.

You shouldn’t be on the hook for servicer errors

Borrowers affected by these servicer issues will be placed into an administrative forbearance until things are sorted out, the Education Department said. In the meantime, you shouldn’t owe any payments and will not face interest charges.

The months spent in administrative forbearance should still count for those borrowers working toward loan cancellation under an income-driven repayment plan or the public service loan forgiveness program.

If your servicer is not following those instructions, you can file a complaint with the Education Department’s feedback system at Problems can also be reported to the Federal Student Aid’s Ombudsman, said higher education expert Mark Kantrowitz.

If you’re unable to reach your servicer on the phone, sending a message via the company’s website may work, Kantrowitz added.

On-ramp periods give borrowers breathing room anyway

In large part because the Biden administration anticipated that it would not be easy to get tens of millions of borrowers back into repayment after a three-year break, it has implemented a 12-month “on-ramp” period.

Through this September, borrowers should be protected from most of the usual repercussions of late or missed payments, including wage garnishments and negative reports to the credit bureaus.

The Education Department recently sent a letter to credit reporting and credit scoring companies reminding them that borrowers’ current activity is not necessarily indicative of an inability or unwillingness to make payments.

People should challenge any negative marks on their credit by contacting their loan servicer or the FSA Ombudsman, Kantrowitz said.

Has the restart of student loan payments negatively affected your credit? If you’re willing to talk about your experience for a story, please email me at

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