Education Department withholds payments from student loan servicers

The Education Department is withholding payments from three student loan servicers because of billing problems, with one of those companies including a subsidiary of Maximus.

The department said the companies have not met their contractual obligations to send timely and accurate statements to 758,000 borrowers.

Aidvantage services about one-fourth of all Education Department student loans, Maximus' federal general manager Teresa Weipert told Washington Technology in a June interview.

Aidvantage is responsible for handling payments, managing accounts and providing customer services. It is one of five companies on the 10-year, $16 billion contract finalized in the spring.

The department is withholding the largest amount from Aidvantage at $2 million. EdFinancial is having $161,000 withheld and Nelnet is having $13,000 withheld.

The Education Department said the amounts are based on the number of borrowers affected.

A Maximus spokeswoman told WT that the issues have been resolved.

“Upon our identification of this issue, we took immediate action to rectify the error and prevent any risk of future occurrence,” the spokeswoman said in the statement.

She added the company is servicing the loans of 9 million borrowers.

In addition to withholding payments on the contracts, Education told the companies to put the affected borrowers into administrative forbearance until the issues are resolved. This means the borrowers do not need to make payments and any accrued interest will be adjusted to zero.

Student loan payments were suspended during the COVID-19 pandemic. The Biden administration also has pushed for permanent loan forgiveness for many borrowers.

One result of that has been an uneven restart to the student loan payments. In the fall, the department discovered errors by the loan servicing provided by Mohela and withheld $7.2 million in payments.

“We will not allow servicers to cause harm to borrowers as they resume making their monthly payments,” Federal Student Aid Chief Operating Officer Richard Cordray said in a department statement. “We are committed to providing a seamless repayment experience for borrowers. We will continue our strong oversight and efforts to hold servicers to their contractual obligations and make sure borrowers are not harmed by these errors.”