Over 300,000 Federal Student Loan Borrowers Received Incorrect Bills From Their Servicers

By Maria Carrasco, NASFAA Staff Reporter

Thousands of borrowers have received bills from servicers with incorrect payment amounts after applying to the Saving on a Valuable Education (SAVE) repayment plan, the Biden administration's new income-driven repayment plan, multiple reports found.

As millions of federal student loan borrowers enter repayment for the first time in three years, The New York Times reported earlier this month that borrowers discovered that their monthly payments had been miscalculated, with higher amounts than what they would’ve originally owed. These miscalculations affected borrowers being transferred from the REPAYE payment plan to the newly rebranded SAVE plan.  

According to The New York Times, the Missouri Higher Education Loan Authority (MOHELA) used the 2022 poverty guidelines instead of 2023 poverty guidelines to calculate the payments. That caused around 280,000 borrowers to be given “modestly higher” payment amounts than what they would have owed. Under the new SAVE plan, the amount of income protected from payments rose to 225% of the federal poverty guideline. 

Additionally, the Department of Education (ED) said there were discrepancies in some borrowers’ payment amounts from ED’s standard review process in September. That led some servicers to audit borrowers’ files regarding calculations made to family size, income, or marital status, and as a result, some borrowers’ payments were too high and a “very small number” of borrowers were “charged too little,” The New York Times reported. 

Borrowers affected were notified about their correct payment amount, according to ED. And those who paid too much will be offered a refund, The New York Times reported. 

ED originally estimated 420,000 borrowers were affected by the erroneous billing issue, according to The Washington Post. But POLITICO reported on Monday that after an internal review, the department believed that about 305,000 federal student loan borrowers were affected. 

“While we regret any error, the Department is working closely with student loan servicers to ensure that they are providing borrowers the information they need and holding servicers accountable when they do not,” an Education Department spokesperson told POLITICO. “Because of the Department’s stringent oversight efforts and ability to quickly catch these errors, servicers are being held accountable and borrowers will not have payments due until these mistakes are fixed.”  

Scott Buchanan, the executive director of the Student Loan Servicing Alliance, told The New York Times that “most of the current issues had been addressed” and that servicers were upgrading their computer systems to handle more requests online.

“When you make big changes in the midst of resumption — including transferring people into a new repayment program that is far more complicated than the last one — there will be challenges and pockets of borrowers where we have to do manual work,” Buchanan told The New York Times.

Buchanan also told The Hill that loan servicers have “overcome bugs in the system that are giving borrowers incorrect payment information.

“I think most of the transition we’ve had to do operationally and systemically [has] gone reasonably well,” Buchanan told The Hill.  “I think there have been some challenges in terms of sort of conversion of accounts to the SAVE plan.”

Due to long wait times to reach servicer representatives by phone, NASFAA recommends that borrowers and financial aid administrators ensure the information they’re looking for is not on, or their own loan servicer’s website before reaching out to servicers. We also recommend communicating by email or using live chat features, rather than contacting their servicer’s call center. This will help reduce phone call waiting time for borrowers who must speak with a representative.

Additionally, aid offices can also use NASFAA’s Student Loan Repayment Toolkit, which has easy-to-use resources designed to help institutions and aid offices communicate with borrowers as they begin transitioning back into repayment. The toolkit includes a variety of components, such as social media posts, one-page infographics, and videos that can be distributed through email, social media, postal mail, flier distribution, or other methods.


Publication Date: 10/26/2023

David S | 10/26/2023 1:17:47 PM

Darren, I might agree with you if servicing problems were purely a post-pandemic phenomenon. But while some of the details shift from one issue to another over time, inaccurate billing, borrowers' inability to reach their servicers...nothing new.

All part of the price we pay for America losing the desire to invest in the future, and to spend money only on immediate issues, and treating nothing, including higher ed, as a public good. If even just half the money that's been lent to students had gone instead to direct support for institutions of higher ed and Pell Grants, this country would be in a very different place. So shortsighted.

Darren C | 10/26/2023 11:45:49 AM

These failures should be a surprise to no one that has been working in the Financial Aid industry for at least a short time. The "leadership" involved in Federal Student Aid continually tries to fit a round peg into a square whole. They say that they want to fix the system and present real solutions, they continue to do neither.

When you take the responsibility of student loan payments away for 3+ years in the name of “relief” and then expect that people will happily and willingly accept that responsibility again, you are as out-of-touch as possible. When you try to keep loan servicing contracts afloat for multiple years, with virtually no repayment occurring, then expect these servicers to handle a flood of new changes and requests from literally millions of borrowers roughly all at the same time, you’re lost.

This entire situation has been handled in an extremely short sighted, disingenuous way. We’re now starting to see the results. Where does the blame fall? It seems to fall everywhere except on those that had the power to make these major decisions. It is no surprise that loan servicers are struggling here, but they are by no means solely to blame. Until we look at the core of the issues with the education system, namely high cost and people going into debt because of it, we’ll continue to have to deal with issues such as these over and over again.

Ben R | 10/26/2023 9:41:02 AM

If payments are based on a tax return, shouldn’t they use the 2022 poverty guideline if they are basing it on 2022 taxes?

James C | 10/26/2023 8:18:08 AM

We have a broken student loan system that is getting worse, not better.

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