Understanding your student loan repayment options can be overwhelming, especially when important notifications don’t come through as they should. Recently, Massachusetts Attorney General Andrea Joy Campbell announced a $1.8 million settlement with Nelnet, one of the largest federal student loan servicers. The settlement highlights the importance of proper communication between loan servicers and borrowers, especially for those using Income-Driven Repayment (IDR) plans.

Here’s a simple breakdown of what happened and what it means for borrowers like you.

What Are Income-Driven Repayment (IDR) Plans?

IDR plans help borrowers make their student loan payments more affordable by basing the monthly payment on income and family size instead of the total loan balance.

• Example: If you earn $40,000 a year and have a family of four, your payment could be as low as $0 per month.

IDR plans also offer perks like potential loan forgiveness after a certain number of years of qualifying payments and reduced interest charges in some cases.

What Went Wrong with Nelnet?

Loan servicers like Nelnet are required to help borrowers stay on track with their IDR plans. This includes reminding them to recertify their income and family size every year.

What Recertification Means:

To stay in an IDR plan, borrowers must update their loan servicer annually with their current income and family size. If this isn’t done by the deadline, payments may increase drastically.

Nelnet’s Mistake:

Between 2013 and 2017, Nelnet didn’t provide proper notifications:

• They failed to give borrowers at least 60 days’ notice about recertification deadlines.

• They didn’t clearly explain what would happen if borrowers missed the deadline, such as:

  • Higher monthly payments.

  • Interest being added to the loan balance (known as capitalization).

These failures violated state consumer protection laws and left many borrowers struggling with sudden, unexpected payment hikes.

How the Settlement Helps Borrowers

Under the settlement, Nelnet must:

1. Pay $1.8 million to the state of Massachusetts.

2. Follow federal regulations to improve communication with borrowers.

3. Adopt better practices to make it easier for borrowers to continue making affordable payments.

What Should You Do if You Have Federal Student Loans?

If you’re struggling to make payments or want to avoid issues like these in the future, here’s how you can take control:

1. Consider the New SAVE Plan

• The SAVE Plan is a new IDR option that offers even more affordable payments.

• Example: Under SAVE, some borrowers might pay $0 a month depending on their income.

Visit the SAVE payment estimator to see how it could work for you.

2. Check Your Notifications

• Always keep an eye on emails or letters from your loan servicer about deadlines.

• Set reminders to recertify your income and family size annually.

3. Explore Forgiveness Options

• The Public Service Loan Forgiveness (PSLF) program and an upcoming payment count adjustment might help you qualify for loan forgiveness.

• If you have privately owned federal loans, consolidate into the Direct Loan Program by April 30, 2024, to qualify.

4. Use Trusted Resources

Visit mass.gov/ago/studentloans for reliable information on repayment plans, forgiveness programs, and your rights as a borrower.

Why This Matters

Loan servicers play a critical role in ensuring borrowers can access affordable repayment plans. When they fall short, it’s borrowers who suffer. This settlement is a reminder to stay proactive with your loans and to advocate for clear communication and fair treatment.

By staying informed and exploring options like the SAVE Plan or forgiveness programs, you can take control of your student loans and set yourself up for financial success in the years ahead.