758,000 more student-loan borrowers didn't receive on-time billing statements in the fall — and they won't have to make payments until the issues are resolved

• The Education Department said 758,000 student-loan borrowers didn't receive on-time billing notices.
• As a result, Nelnet, Aidvantage, and EdFinancial are having a combined $2 million in pay withheld.
• All impacted borrowers were placed in administrative forbearance until issues are resolved.

Thousands more student-loan borrowers failed to get the on-time billing statements they were owed in the fall — and the companies that manage their debt are being punished.

On Friday, President Joe Biden's Education Department announced it identified 758,000 additional borrowers that did not receive on-time billing statements in October, the first month bills started to become due after an over three-year pause. This comes after the department in October identified over 2 million borrowers who experienced the same issue.

According to the department, three servicers — Aidvantage, EdFinancial, and Nelnet — were responsible for these errors. As a result, the department is withholding a combined amount of over $2 million in pay from the companies, "amounts based upon the number of borrowers impacted by these errors," the press release said.

Specifically, Aidvantage was hit with a $2 million penalty, with $161,000 for Edfinancial and $13,000 for Nelnet.

"Today's actions make clear that the Biden-Harris Administration will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers," Education Secretary Miguel Cardona said in a statement.

"As millions of Americans return to repayment, the Department of Education will continue to engage in aggressive oversight of student loan servicers and put the interests of borrowers first," he said. "When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless." 

In the meantime, the department said it instructed each of the three servicers to place impacted borrowers on administrative forbearance, during which they will not be required to make payments and interest will not accrue on their balances.

Additionally, the time in forbearance will still count toward forgiveness progress in Public Service Loan Forgiveness and income-driven repayment plans.

With this latest announcement, all federal servicers have received penalties for failing to fulfill their contractual obligations. The Education Department withheld over $7 million in October pay from servicer MOHELA after finding that it had failed to send on-time statements to 2.5 million borrowers.

And lack of timely statements is just one of the many issues borrowers have experienced since they entered repayment in the fall. The Consumer Financial Protection Bureau released a report on Friday of its oversight of student-loan servicing since payments resumed, and it found borrowers were waiting on hold with customer service for an average of 70 minutes in October, and as a result, nearly 30% of those calls were abandoned.

While the department put forth an accountability framework to ensure servicers are meeting their obligations — including withholding their pay if they don't — some servicers have previously told lawmakers that they're doing all they possibly can, given the limited resources they have.

Congress failed to boost funding for Federal Student Aid last year, and with Republicans proposing budget cuts this time around, servicers recently told Democratic lawmakers they need to boost funding to properly carry out their duties.

"For three years we have very vocally warned that reduced fees and continued extensions of the payment pause meant it would be highly unlikely we would be prepared to manage call volume when repayment finally began," Nelnet said in a letter to lawmakers in December.

The department said in its press release that it will continue to monitor servicers' performance to ensure they're meeting their obligations, and if not, it'll take additional action.

"We will not allow servicers to cause harm to borrowers as they resume making their monthly payments," Federal Student Aid Director Rich Cordray said in a statement. "We are committed to providing a seamless repayment experience for borrowers. We will continue our strong oversight and efforts to hold servicers to their contractual obligations and make sure borrowers are not harmed by these errors."