A major student loan servicer has agreed to pay Massachusetts $1.8 million in a settlement over allegations that the company failed to communicate information to borrowers about renewing their income-driven repayment (IDR) plans, according to the state attorney general.
Nelnet is one of the largest student loan servicers that receives funding from the federal government to process the billing of student loans. In recent weeks and months, Nelnet and other major servicers have been under scrutiny from the Education Department for allegedly not meeting their contractual obligations.
In Massachusetts, Nelnet was accused of failing to communicate with borrowers about renewing income-drive repayment plans, which are more affordable payment schedules built on the borrower’s income and family size instead of the balance on their loan.
The state attorney general’s officenoted in a press releasethat Nelnet was responsible for helping borrowers enroll in more affordable plans — an obligation that Massachusetts alleges the servicer failed to meet. The state said that federal regulations require Nelnet and other student loan servicers to notify borrowers to renew their plans within at least 60 days of the deadline.
Massachusetts Attorney General Andrea Campbell’s (D) investigation into the servicer discovered “many of Nelnet’s communications with borrowers between 2013 and 2017 failed to comply with these regulations and thus violated state consumer protection law.”
“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.”
The settlement agreement requires Nelnet to pay Massachusetts $1.8 million, to adhere to the federal notice requirements of income-driven repayment plans and to take steps to “make it easier for borrowers to continue making more affordable income-driven payments,” according to the press release.
Nelnet said in a statement to The Hill that it is “pleased to close this chapter with improved IDR communications and servicing to borrowers.”
“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,” the statement read.
The settlement agreement comes just a week after the Biden administrationwithheld more than $2 millionto three student loan servicers: Nelnet, EdFinancial and Aidvantage. The Education Department said the servicers “failed to meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment.”
The Education Department has withheld payments to student loan providers in the past forerrors on billing statements.
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FAQs
A major student loan servicer has agreed to pay Massachusetts $1.8 million in a settlement over allegations that the company failed to communicate information to borrowers about renewing their income-driven repayment (IDR) plans, according to the state attorney general.
Which loan servicer agrees to pay nearly $8 million to resolve alleged false claims in connection with federal Education loans? ›
Conduent Education Services LLC, fka Xerox Education Services LLC, dba ACS Education Services LLC (CES), a contractor that serviced student loans for lenders under the Federal Family Education Loan Program (FFEL), has agreed to pay $7.9 million to resolve allegations that it violated the False Claims Act by submitting ...
What is the Nelnet controversy? ›
As early at 1993, Nelnet was accused of using a tax loophole to generate upwards of $1.2 billion dollars in profits from student loans that it managed. In 2007, the states of New York and Nebraska accused Nelnet of industry kickbacks and gifts to colleges and universities that pushed students toward Nelnet loans.
Will the settlement wipe 6b in student loan debt? ›
WASHINGTON -- The Biden administration said Wednesday that it has approved the cancellation of more than $6.1 billion in student loan debt held by 317,000 borrowers who previously attended The Art Institutes, a now-defunct network of for-profit colleges.
What is the defense against repayment lawsuit? ›
Under the law, you may have a borrower defense to repayment if your school engaged in certain misconduct related to the making of a federal loan or the educational services it provided which caused you harm warranting a full discharge of your applicable federal Direct Loans.
Who agrees to be responsible for pay back the loan payments if the borrower fails to make them unable to do so? ›
A cosigner is not the main borrower. When you cosign a loan, you agree to be responsible for someone else's debt. If the main borrower misses payments, you must make the payments.
Which state has the highest student debt? ›
Maryland is the state with the highest average student loan debt. Wyoming and Utah have lower student debt per capita than other states. They also have some of the lowest student debt prevalence rates and average debt levels for recent graduates.
What is the student loan rate in Massachusetts? ›
MEFA undergraduate loans have fixed interest rates from 5. 35% to 7.95% APR*** with multiple repayment options. By borrowing a loan with a fixed interest rate, you'll ensure stable, predictable monthly payments for the life of the loan.
What is the average student loan debt for a 25 year old? ›
Based on data from the office of Federal Student Aid, this is the average amount each age group owed in student loan debt as of Q4 2022: 24 and Younger: $14,315. 25 to 34: $33,173. 35 to 49: $43,438.
Are Nelnet loans forgiven? ›
Teacher Loan Forgiveness
Also known as the Perkins Loan Cancellation and Discharge program, this forgiveness option provides full or partial loan forgiveness to eligible teachers with Nelnet-serviced student loans. Depending on the subject taught, they may be eligible for up to $17,500 or $5,000 in loan forgiveness.
The Domina Law Group initially filed a class action lawsuit against Nelnet on June 8, 2019 on behalf of a woman in Oregon who claimed that her income-based repayment plan was cancelled by the student loan-servicing company prior to its stated deadline before she had the chance to renew it.
Is Nelnet considered a federal student loan? ›
Nelnet is a federal student loan servicer working on behalf of the U.S. Department of Education (ED), the government agency that lends you student loans.
How will I know if my student loans are forgiven? ›
What is the status of my Public Service Loan Forgiveness (PSLF) application? Log in to StudentAid.gov to track your Public Service Loan Forgiveness (PSLF) application status or PSLF progress. Contact the Federal Student Aid Information Center at 1-800-433-3243 with additional questions.
How much is the Nelnet settlement? ›
Andrea J. Campbell's office settled with Nelnet, one of the biggest student loan providers in the United States, for $1.8 million.
What is the borrower defense update for 2024? ›
On April 4, 2024, the court issued further instructions to enjoin the rule and postpone the effective date of the regulation pending final judgment in the case. The injunction is effective until there is a final judgment in the case.
What is the Sallie Mae lawsuit? ›
Lawsuits later revealed that one set of these predatory Sallie Mae private student loans had default rates ranging “between 50 and 92 percent every year from 2000 to 2007,” and that Sallie Mae's own expectations were that these loans would default at rates as high as 92 percent.
What is the False Claims Act the federal government's primary civil remedy for? ›
The False Claims Act is the government's primary civil remedy to recover false claims for government funds and property. The funds are paid out under government contracts, such as national security and defense contracts.
Who is Academy financial Solutions? ›
Academy Financial, Inc. is an independent wealth management firm that uses a holistic planning process to identify value and opportunities for our clients. It all starts with the planning and understanding the goals and expectations of the clients.
Is Doc Prep pay legit? ›
After some searching the Internet, it looks like that Amerifed Doc Prep has claimed many victims. If you check out their profile on the Better Business Bureau, they have a customer review rating of 1.75 out of 5 and a BBB rating of F.
