5 Tips To Fix Errors

Student loan repayment is a bit of a disaster right now. Widespread billing irregularities are resulting in miscalculated payments, untimely statements, and rampant misinformation. Some borrowers have received massively inflated bills, with loan servicers asking them to pay tens of thousands of dollars toward their student loans. As a result, many are facing the prospect of delinquency or losing progress toward student loan forgiveness.

The problems are the result of a perfect storm of issues. Millions of federal student loan borrowers all resumed repayment last month for the first time in over three years, following the end of the student loan pause. Republican leadership in Congress opted to flat-fund the Education Department in protest over President Biden’s earlier student loan forgiveness plan. And loan servicers contracted with the department to manage the sprawling federal student loan system are under enormous strain as they deal with processing delays, understaffing, and call center backlogs while trying to implement a number of new Biden administration student debt relief measures.

In some instances, the consequences that borrowers face as a result of these problems can be dire. Here’s what’s going on, and what to do if you face student loan repayment errors.

Mass Student Loan Repayment And Billing Errors

The Education Department last week provided detailed insights into some of the extreme billing mistakes student loan borrowers are encountering.

In one case, a borrower received a student loan bill for $108,895.19, representing their entire loan balance. “The borrower’s loan servicer erroneously reduced the loan term (how long the borrower has to repay the loam) down to 2 months from 120 months,” explained the Education Department in a memorandum. Several other borrowers also received bills for over $100,000, according to the department, while several hundred more people were billed for more than $10,000.

All in all, the Education Department estimated that more than 20,000 people received erroneously inflated student loan billing statements for the month of October. Some of these borrowers had selected an income-driven repayment plan but “were affected by ‘fat fingering’ the borrower’s annual income’” — whereby their income was erroneously inflated to as high as $1 million per year. Nearly 80,000 borrowers experienced billing errors related to their conversion to the new SAVE plan, where monthly payments were incorrectly calculated by loan servicers based on erroneous income or family size information, or because loan servicing transfers disrupted the flow of information.

In addition to incorrect billing amounts, millions of borrowers received untimely bills, and some received no bill at all for the month of October. This, in turn, resulted in hundreds of thousands of borrowers becoming delinquent on their student loans, according to the department.

Biden Administration Takes Some Steps To Address Student Loan Repayment Problems

The Biden administration announced it was taking steps to curtail these student loan repayment problems and mitigate harm to borrowers.

“The Department has directed servicers to place all affected borrowers into administrative forbearance until the problem is fixed,” said Federal Student Aid Chief Operating Officer Rich Cordray in a statement last week.

However, mass administrative forbearances are becoming a widespread issue in and of itself. Typically, these periods don’t count toward student loan forgiveness, and interest still accrues. However, Cordray said, “We will adjust to zero any interest that accrues and credit [borrowers] with progress toward public service loan forgiveness and income-driven repayment” while they are in an administrative forbearance.

In addition, the Education Department announced it would be “withholding $7,209,735.13 in payments to MOHELA from the month of October” due to that servicer’s billing errors (although the repayment problems are not limited to only MOHELA). Cordray argued that that this would send a message to student loan servicers “that there are consequences to their actions when they do not meet the terms of their contracts.”

Tips For Borrowers To Avoid Or Fix Student Loan Repayment Issues

To avoid some of the most egregious student loan repayment-related problems, borrowers should take at least a few steps to protect themselves:

Watch out if you’re on auto debit, as monthly payments may be deducted from your bank account without you realizing that there’s been a payment miscalculation. Log in to your loan servicer’s online student loan account on a monthly basis just to check to make sure there are no billing irregularities. If you’re not sure who your loan servicer is, check at StudentAid.gov.
Try to verify that your monthly billing amount is accurate. If you were on the Revised Pay As You Earn (REPAYE) plan prior to the student loan pause and you have not supplied updated income information since 2020, you should have been automatically converted to SAVE, with a lower monthly payment.
If you think your calculated income-driven repayment amount is incorrect, cross-reference the calculation by using the Education Department’s student loan simulator. Be sure to use the correct income information that you supplied when you submitted your IDR application.
Take advantage of the Biden administration’s on-ramp transition period, during which borrowers will not be reported as delinquent or defaulted if they miss a payment, according to the Education Department. Instead, the missed payment will be retroactively converted to a forbearance. However, the missed payment may not count toward student loan forgiveness under IDR and PSLF, and interest may still accrue.
If there’s a problem, contact your loan servicer, or submit a dispute to the Department of Education’s FSA Feedback or FSA Ombudsman group. You should also file a complaint with the federal Consumer Financial Protection Bureau.