Massachusetts Attorney General Andrea J. Campbell’s office has reached a $1.8 million settlement with one of the nation’s largest student loan servicers for failing to alert borrowers about affordable repayment options.
The settlement with Lincoln-based Nelnet Inc. comes months after millions of borrowers nationwide resumed their student loan payments amid heightened state and federal scrutiny of those companies’ ability to help those borrowers navigate an often confusing bureaucracy.
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 resolves allegations that the company, one of four major student-loan servicing firms, didn’t adequately communicate with borrowers about renewing income-driven repayment plans that provide access to affordable payments, Campbell’s office said in its statement.
Under such plans, payments are based on a borrower’s income and family size, rather than their loan balance. The plans also offer the possibility of valuable interest benefits and loan forgiveness after the borrower makes qualifying payments for a certain number of years, according to Campbell’s office.
Campbell’s office said it found that, between 2013 and 2017, Nelnet failed to comply with the battery of regulations governing its communications with borrowers, violating state consumer protection law.
The settlement requires the company to pay that $1.8 million to the state; to comply with federal regulations on income-driven repayment plans; and to implement practices that make it easier for borrowers to access that option, Campbell’s office said in its statement.
In a statement, a Nelnet spokesperson said the company appreciated Campbell’s office for its ongoing 8-year collaboration related to the Income Driven Repayment program, which included review of recertifications from 2011 through 2017 and clarified Nelnet’s interpretation of IDR Plan requirements. Nelnet 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 company said in its statement.
The settlement comes amid a time of heightened scrutiny of the major loan-servicing firms as millions of borrowers struggle to make their payments and navigate an often confusing bureaucracy.
Last month, a cadre of Democratic lawmakers in the U.S. Senate again grilled loan servicers on what they’re doing to ease a painful transition for millions of Americans.
Among the headaches: Miscalculated bills, difficulty reaching servicers, and long wait times when they do, Democratic U.S. Sens. Elizabeth Warren and Ed Markey, of Massachusetts, wrote in a battery of letters to the Big Four servicers.
Markey and Warren were joined on the letters to servicers MOHELA, EdFinancial, Nelnet and Maximus by fellow Democratic U.S. Sens. Richard Blumenthal, of Connecticut, and Chris Van Hollen, of Maryland.
The latest volley of correspondence came more than two months after the lawmakers initially wrote to the loan companies, saying they were deeply worried about their ability to meet borrowers’ demand for services as payments resumed.
In a statement, the lawmakers pointed to a recent report by the U.S. Consumer Financial Protection Bureau detailing a flurry of problems and errors with borrowers reporting long hold times, incorrect information about payment amounts and due dates, inaccurate payment histories, and issues accessing loan cancellation programs.
In a letter to the servicing companies EdFinancial and Nelnet, the lawmakers took the firms to task for their failure to provide robust answers [that] leave us unable to understand the challenges borrowers face as they return to repayment, MassLive previously reported.
