GAO report flags instruction gaps causing loan servicer errors amid policy overhaul

A GAO review found that federal student-loan servicers struggled with unclear guidance from the Education Department, leading to billing mistakes and long hold times for borrowers.

In a Thursday GAO report, the agency highlighted coordination problems between the Department of Education and four federal loan servicers—Nelnet, Aidvantage, MOHELA and EdFinancial—over recent program changes. Servicers complained that insufficiently clear instructions resulted in repeated exchanges, delayed communications and billing errors for borrowers. The GAO suggested the Federal Student Aid office create guidelines for initiating early discussions on complex or time-sensitive reforms.

The Education Department, through acting executive director Mell Brittian-Smith, opposed the proposal, arguing that formal criteria would be “fraught with challenges and risks.” The department noted it had already sought servicer input on draft repayment-plan changes. Borrowers have experienced incorrect payment information and long hold times as the Trump administration’s sweeping repayment overhaul, including new income-driven plans and borrowing caps, is implemented. Similar implementation issues were reported during the previous Biden administration’s post-pandemic repayment restart.