The Massachusetts attorney general reached a significant settlement with a student loan servicer after it failed to tell borrowers about renewing their income-driven repayment (IDR) plans.
Andrea J. Campbell’s office settled with Nelnet, one of the biggest student loan providers in the United States, for $1.8 million. IDR can be ideal for low-income earners repaying their student loans. Monthly IDR payments are based on the borrower’s family size and income rather than the size of their loan.
There are around 43.4 million student loan borrowers in the United States. In all, the total loans come to $1.6 trillion, putting the average at nearly $36,900 per person.
“Student loan servicers play a crucial role in ensuring that borrowers can access more affordable loan payments,” Campbell said in a statement. “As we continue to address issues of affordability, we will prioritize student loan debt and hold service providers accountable when they fail to fulfill their notification and information obligations to Massachusetts borrowers.”
Campbell’s office said the settlement “requires Nelnet to pay $1.8 million to the Commonwealth, to comply with federal notice requirements relating to IDR plans, and to implement business practices that make it easier for borrowers to continue making more affordable income-driven payments.”
At least 60 days’ notice must be sent to borrowers informing them that they must complete recertification—they must restate their discretionary income and family size—before the deadline.
In a statement, Nelnet said: “In addition to partnering with the United States Department of Education to ensure strict compliance and adherence to federal student loan servicing requirements, Nelnet holds itself to the highest standards when assisting borrowers and helping them achieve their educational pursuits.”
Newsweek reached out to Nelnet via email for comment.
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Last month, senators, including Massachusetts’ Elizabeth Warren, sent a letter to the Department of Education highlighting their concern over how lenders are dealing with student loan repayments after a pause during the COVID-19 pandemic.
The Massachusetts settlement comes shortly after the Biden administration held back money this month to Nelnet and two other student loan providers, EdFinancial and Aidvantage. According to the Education Department, the lenders did not “meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment.”
A total of $2 million was withheld from Aidvantage, $161,000 from EdFinancial, and $13,000 from Nelnet, with numbers “based upon the number of borrowers impacted by these errors.”
Newsweek reached out to Aidvantage and EdFinancial via email for comment.
The White House today announced some borrowers will be eligible to have their loans cancelled if they have made at least 10 years of payments. They must also have borrowed less than $12,000. Eligible people were encouraged to sign up to the SAVE plan on the studentaid.gov. website.
“This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans,” Biden said in a statement.
Critics of student loan forgiveness say it forces Americans who did not attend college to pay off the debts of wealthier people.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.