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Nearly a million student loan borrowers back in forbearance following servicer billing errors

The Department of Education has withheld millions of dollars of payment to student loan servicers over billing errors that triggered delinquencies for many students.

The Department of Education withheld $7.2 million in payment to student loan servicers over several billing errors that triggered a delinquency status for borrowers as repayments picked up again at the start of October.

In a statement, the Education Department said that loan servicer MOHELA failed to send billing statements on time to 2.5 million borrowers, with some receiving them within only seven days of their payment date. The Education Department requires servicers to send billing statements to borrowers at least 21 days before their due date. 

As a result, 800,000 borrowers were placed in delinquency status. Processing errors have also resulted in a small number of borrowers receiving incorrect payment amounts on their billing statements and borrowers with pending Borrower Defense claims incorrectly placed back in repayment status. 

Along with withholding payment, the servicers have been directed to place all affected borrowers in forbearance until the problem is fixed. Interest will not accrue. Impacted borrowers will get credit toward income-driven repayment (IDR) forgiveness or Public Service Loan Forgiveness (PSLF).

"The actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures," U.S. Secretary of Education Miguel Cardona said. "We are committed to fixing our country’s broken student loan system, and that includes strengthening oversight and accountability and taking every step possible to improve outcomes for borrowers."

If you're having trouble making payments on your private student loans, you won't benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes.


The forbearance is separate from the 12-month on-ramp period the Biden administration announced as part of its ongoing effort to provide student loan relief. The 12-month reprieve prevents the worst consequences of missed, late, or partial payments, according to the blog. Borrowers who miss payments won't be reported to credit bureaus, put into default, or see their loans sent to collection agencies. However, interest still accrues during the twelve-month grace period, and missed payments won't count toward loan forgiveness.

The on-ramp student loan program is scheduled to run from Oct. 1 to Sep. 30, 2024, the Department of Education said. 

After one missed payment, a student loan is typically considered delinquent, according to the Department of Education. Loan accounts remain delinquent until the past due amount is paid or other arrangements are made, such as deferment, forbearance, or changing repayment plans. 

After 90 days, the loan servicer reports the delinquency to the three major national credit bureaus. 

Student loans generally fall into default after 270 days of missed payments, depending on the type of loan, and penalties are typically triggered after 425 days. Student loans made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program are considered to be in default after 270 days. Loans made under the Federal Perkins Loan Program can be in default after a missed scheduled payment, according to the Department of Education. 

Unresolved loan delinquencies that go into default could mean a borrower will be responsible for paying the loan balance immediately. 

If you're having trouble making your private student loan payments, you could consider refinancing to a lower interest rate. Visit Credible to speak with a student loan expert and get your questions answered.


To date, the Biden administration has approved $127 billion in debt relief for nearly 3.6 million borrowers and launched the most affordable student loan repayment plan in history, the Saving on A Valuable Education (SAVE) plan. The SAVE plan can lower monthly payments to zero dollars or help borrowers making payments save at least $1,000 a year.

Additionally, the Biden administration is pushing forward with a new forgiveness plan, which would include a more limited number of eligible borrowers than the mass debt relief previously offered. The plan, which is in its initial stages of development, is intended to provide debt relief for four groups of borrowers, including those who:

If you are currently in school or starting soon and need more financial aid than you can receive through FAFSA, you could consider taking out a private student loan. Visit Credible to find your personalized rate without affecting your credit score.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at and your question might be answered by Credible in our Money Expert column.

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