Feds dock student loan servicers for late notices

WASHINGTON — The Biden administration is docking more than $2 million in payments to student loan servicers that failed to send billing statements on time after the end of a coronavirus pandemic payment freeze.

The Education Department said Friday it will withhold payments from Aidvantage, EdFinancial and Nelnet for failing to meet their contractual obligations.

The servicers failed to send timely statements to more than 750,000 borrowers in the first month of repayment, the agency said.

Education Secretary Miguel Cardona said his agency will continue to pursue “aggressive oversight” and won’t give loan servicers “a free pass for poor performance.”

It’s the latest attempt to straighten out a process that has been marred by errors since student loan payments restarted in October. Tens of thousands of borrowers have received billing statements late or with incorrect amounts as servicers scrambled to jump-start the process.

The new action will take $2 million from Aidvantage, $161,000 from EdFinancial and $13,000 from Nelnet, based on the number of borrowers who faced errors.

Nelnet said in a statement that less than 0.04% of its borrowers had missing or late statements, including some who chose to move their due dates up “to better meet their situation.”

Aidvantage and EdFinancial didn’t immediately return messages seeking comment.

Borrowers who didn’t get statements within the required 21 days before payment will be placed in administrative forbearance, which means their payments will temporarily be paused and any interest that accrues will be removed.