Student loan servicer to pay Massachusetts nearly $2 million in settlement

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 office noted in a press release that 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 administration withheld more than $2 million to 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 for errors on billing statements.