- A new government watchdog report found gaps in oversight over federal student-loan servicers.
- The Education Department stopped moniting servicer accuracy and call quality after February 2025 staffing cuts.
- The report said it puts borrowers at risk of inaccurate billing and repayment statuses.
Major student-loan companies need more accountability, a federal watchdog said.
On Wednesday, the Government Accountability Office released its report on the Department of Education's oversight over federal student-loan servicers. In February 2025, Federal Student Aid stopped assessing servicers on their call quality and billing accuracy due to staffing cuts at the department.
The report said that discontinuing oversight leaves FSA without assurance that servicers are providing borrowers with accurate information and continuing to meet their contractual obligations. Prior to the staffing cuts, the GAO said that four out of the five major servicers did not meet the department's performance standards and faced $850,000 in penalties.
Had the oversight continued, the GAO said, the penalties for the servicers could have increased.
This report comes at a critical transition for federal student-loan repayment. The Department of Education will begin implementing the repayment overhaul from President Donald Trump's "big beautiful" spending legislation in July, including the creation of new repayment plans and borrowing caps for advanced degrees. The GAO said that these sweeping changes require bolstered oversight as servicers facilitate the transition.
"FSA is missing opportunities to ensure that servicers are providing borrowers complete and accurate information as it implements major statutory changes to student loan repayment options affecting millions of borrowers," the report said. "For instance, servicers will need to accurately record the transition to new repayment plans for millions of borrowers."
The GAO recommended that the Department of Education ensure that FSA continues to monitor servicer accuracy and call quality. Richard Lucas, acting chief operating officer of FSA, wrote in a response to the GAO report that the department disagrees with the recommendation, saying that the agency uses other metrics to "meaningfully measure" servicer performance.
"FSA uses Servicer Satisfaction Surveys that score the servicers' performance across five measures each for borrower communications, contact center, and website support, as well as six measures for the servicers' management of loans," Lucas wrote. He added that FSA leadership is visiting servicers on-site to monitor performance, in addition to weekly meetings with the servicers.
Sen. Bernie Sanders and Rep. Bobby Scott commissioned the report and said it raises a red flag for the future of repayment for millions of borrowers.
"The Education Department (ED), in its oversight of the $1.6 billion student loan portfolio, is required by law to ensure that student loan servicers provide borrowers with accurate information about their loans," Scott said in a statement. "When they do not, borrowers can either overpay or be placed in the wrong student loan repayment program. ED's refusal to conduct oversight of student loan servicers is a dereliction of duty."
The last comprehensive report on servicer performance that FSA posted covered the quarter ending September 30, 2024. It prompted Sens. Elizabeth Warren and Jeff Merkley to request data from the servicers themselves on their performance, to which the servicers responded in February that the FSA is responsible for compiling the data.
"ED has repeatedly refused to comply with Congressional requests for basic servicer performance data and now appears to be refusing to allow federal student loan servicers to provide this information, despite previous Administrations granting such requests," the lawmakers wrote.
Undersecretary of Education Nicholas Kent previously told the lawmakers that "FSA is prioritizing efforts to improve customer service to student and parent borrowers" and did not comment on releasing performance metrics.
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