Weak Student Loan Servicer Oversight Could Complicate July 2026 Changes

Student loan borrower advocacy groups and government watchdogs are sounding the alarm that diminishing oversight of loan servicers is starting to cause real problems for borrowers.And things may only get worse in the coming months as major changes to student loan repayment and forgiveness programs are set to take effect in July 2026.“The harm student loan borrowers face today from student loan servicing companies is not accidental—it is the predictable product of decades of policymakers and regulators looking away while the same repeat offenders are paid to rack up a long track record of illegal actions and errors,” said Chris Hicks, Senior Policy Advisor at Protect Borrowers, which published a new report last week analyzing the problems associated with the lack of oversight.  “Now 7.5 million borrowers have weeks to switch repayment plans.The companies standing between them and default are the same ones that have spent decades driving borrowers into it.

Lawmakers and regulators at every level must step up now to protect borrowers by reining in these servicers—instead of handing them yet another opportunity to profit at borrowers’ expense.” Here’s the latest on student loan servicing problems, and what borrowers can do if they experience problems with their loan servicer.Report says student loan servicers lack sufficient oversight The new report from Protect Borrowers blames the Trump administration for failing to adequately supervise the Education Department’s loan servicers.The department contracts with an array of private companies and organizations that help operate the vast federal student loan portfolio.These include a handful of major, public-facing loan servicers such as Aidvantage, Nelnet, CRI, MOHELA and Edfinancial, as well as a collection of more behind-the-scenes contractors that operate the phone lines and processing centers under the branding of the department’s Office of Federal Student Aid (FSA).

“The Trump Administration is failing to carry out its basic statutory requirements to supervise these companies, allowing them to operate unchecked despite findings that they are failing borrowers, while paying these companies more than $1 billion a year,” said Protect Borrowers in a statement last week announcing the new report.“Part of their management responsibilities include helping borrowers navigate student loan repayment,” said Protect Borrowers in the report.“Unfortunately for borrowers, history shows these companies have provided borrowers with the wrong information, taken illegal fees, and wrongly rejected applications for borrowers trying to get in an affordable repayment plan.” The report highlights examples of student loan servicer misconduct, including unlawful denials of income-driven repayment (IDR) applications, misleading borrowers about interest accrual and steering borrowers into costly forbearances that cause interest to accumulate while not counting toward student loan forgiveness.“These illegal acts and practices have affected every type of borrower, with every type of loan, at every stage of repayment,” reads the report.

“When these companies fail to properly do their jobs, borrowers suffer the consequences: they pay more on their loans, are trapped in debt for longer, and millions of them end up in default.” Government watchdogs also criticized weak student loan servicer oversight The new report from Protect Borrowers follows a similar conclusion reached by the Government Accountability Office (GAO), an independent federal government watchdog, just a few months ago.The GAO also found that the lack of oversight over student loan servicers is causing real harm to borrowers.“We found that 4 of the 5 loan servicers didn't meet Education's performance standards for keeping accurate records and faced financial penalties,” said the GAO in a summary of its findings accompanying the publication of its detailed report in March 2026.“Yet in February 2025, the office stopped assessing servicers on accuracy and call quality.

Agency officials cited a reduction in staff capacity for the change.” The GAO was critical of the Education Department’s decision to stop monitoring certain performance metrics of its contracted student loan servicers.These metrics had allowed the department to review servicer performance and impose financial penalties on contractors who consistently failed student loan borrowers.“In February 2025, the Department of Education’s Office of Federal Student Aid (FSA) stopped assessing student loan servicers on accuracy and call quality due to lack of staff capacity, according to agency officials,” said the GAO in its summary.“The decision to stop assessing these performance metrics occurred shortly after the new administration began issuing presidential directives and guidance on downsizing the federal workforce in January 2025.” “By not assessing servicer accuracy and call quality, FSA lacks assurance that borrower records are correct and that servicers are giving borrowers quality information,” continued the GAO.  “Inaccurate records can result in borrowers being billed for incorrect amounts or placed in the wrong repayment status.

Additionally, borrowers need to be given accurate information when they call for help.Addressing these gaps in servicer oversight will assist Education in carrying out its statutory responsibilities and also help the government avoid overpaying servicers for poor performance.” The Education Department disputed the GAO’s conclusions, “asserting that the servicer accuracy and call quality metrics do not meaningfully measure servicers' performance and would not improve the financial health of the federal student loan portfolio,” according to the GAO.Student loan processing problems grow as July changes loom The warnings from Protect Borrowers and the GAO come as the Education Department and its contractors prepare to implement sweeping changes to federal student loan programs starting in July 2026.Over the course of the next several months: More than seven million borrowers will need to be transitioned from Saving on a Valuable Education (SAVE) to other repayment plans.  The department is launching a new income-driven repayment plan called the Repayment Assistance Plan (RAP), which will function in a fundamentally different way than other IDR plans have in the past.  The department is in the process of implementing other changes, including creating a new Tiered Standard repayment plan and allowing certain consolidated Parent PLUS borrowers to transition to the Income-Based Repayment (IBR) Plan from the Income-Contingent Repayment (ICR) Plan.

Borrowers are already starting to experience problems.According to recent reporting by CNBC, federal student loan borrowers are having difficulty accessing affordable repayment plans, are seeing inaccurate payment calculations and are being given inaccurate information about their options.“Signs of strain are already starting to appear,” warned Protect Borrowers in its report last week.What borrowers can do about servicing problems Since the Trump administration has downsized or diminished major federal financial watchdogs like the Consumer Financial Protection Bureau (CFPB), as well as the Education Department’s internal dispute resolution units (particularly the FSA Ombudsman group, which can investigate student loan servicing disputes), borrowers have limited options to address student loan servicing problems.  They can try to escalate disputes within their loan servicer’s system.

They can reach out to their state attorney general office or, if one is available, their state student loan ombudsman or assistance unit.Protect Borrowers has also developed a congressional casework tool for student loan borrowers to enlist the assistance of their federal elected officials.