Blumenthal among Senate Democrats investigating ‘alarming’ student loan mishandling reports

CONNECTICUT (WTNH) — As college students head back to school this month, a group of Senate Democrats, including Sen. Richard Blumenthal (D-Conn), is investigating what they call “alarming reports” of mishandled student loan transfers from loan servicers.

“We’re finding that loan servicers who have received millions of student loan accounts have been adding to the burden of student debt,” Blumenthal said during a news conference on Thursday in Hartford.

In letters sent to the Higher Education Loan Authority of the State of Missouri known as “MOHELA,” Nelnet Inc. and credit reporting agency Experian on Aug. 8, the senators asked questions pertaining to botched student loan transfers.

The video below aired on Aug. 15.

One letter reads, “Over the past few years, tens of millions of student loan borrowers’ accounts have been transferred to new private loan servicers. The resulting chaos has been well-documented: borrowers experienced loan servicing errors ranging from very high and incorrect payment amounts to problems accessing loan cancellation programs, to the incomplete transfer of more than five million accounts.”

The letters were signed by Sen. Elizabeth Warren, Sen. Jefferey Merkley, Sen. Ron Wyden and Sen. Richard Blumenthal.

“These student loan services have entrapped borrowers in a morass of chaos and incompetence,” Blumenthal said.

Lawmakers say at least 1.4 million duplicate student loan records have appeared on borrowers’ credit scores because of a glitch. They say it’s leading to excessive billing and lower credit scores, impacting borrowers’ ability to buy a car, home, or further their education.

“We absolutely demand that these errors be rectified and that the double balances on credit reporting accounts be eliminated right away,” Blumenthal said.

The exact number of students/grads affected is unknown, but borrowers are being urged to check their credit reports.

News 8 reached out to Experian, Nelnet Inc. and MOHELA for comment on the senate investigation.

MOHELA’s media relations team released the following statement:

“MOHELA reported accurately and operated according to the standards provided by the U.S. Department of Education, Office of Federal Student Aid (FSA). As a federal contractor for FSA, MOHELA’s highest priority is providing high quality service to the borrowers we serve. We share borrowers’ concern and remain committed to assisting borrowers and FSA with credit reporting.”

Nalnet said that it shares “borrowers’ frustration.”

“Nelnet accurately followed the Department of Education’s direction and processes in transferring these borrowers,” the statement reads. “In March 2023, Nelnet first alerted FSA that some transferred borrowers were reporting credit discrepancies and has continued to raise the issue in an effort to ensure credit reporting agencies process all transfer files correctly. In fact, a Washington Post article reported that the Department of Education acknowledged the credit reporting errors were not the fault of servicers.”

Experian has not responded to a request for comment.

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