Nelnet to pay $1.8 million for failure to appropriately communicate with borrowers

LINCOLN, Neb. () - A Lincoln-based federal student loan servicer will pay $1.8 million to resolve allegations that they failed to appropriately communicate with borrowers about renewing Income-Driven Repayment (IDR) plans that provide access to affordable payments.

Massachusetts Attorney General Andrea Joy Campbell announced the settlement with Nelnet, one of the nation’s largest federal student loan servicers, on Friday.

The settlement agreement requires Nelnet to to pay $1.8 million to the Commonwealth, to comply with federal notice requirements relating to IDR plans, and to implement business practices that make it easier for borrowers to continue making more affordable income-driven payments, AG Campbell said.

AG Campbell said loan servicers like Nelnet handle billing and other services for federal student loans and are responsible for helping borrowers access more affordable payments through IDR plans.

To enroll in an IDR plan, borrowers must submit documentation of their income and family size to their loan servicer. To continue making income-driven payments, borrowers must “recertify” their income and family size information by the deadline established by their loan servicer each year.

According to federal regulations, servicers, like Nelnet, are required to provide borrowers with at least sixty days notice of the recertification deadline. Services are also required to explain the consequences if borrowers fail to recertify by the deadline, including the estimated amount to which the borrower’s monthly payment will increase and that unpaid interest may be added to the borrower’s loan balance.

AG Campbell said her investigation found that 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,” AG Campbell said. “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.”