October 19, 2023

Servicers Placing Student Loan Borrowers in Administrative Forbearance: What You Need to Know


If you have been hit with unexpected and incorrect payment amounts on your student loans, you’re not alone. The Education Department recently estimated that 420,000 borrowers have been affected by miscalculations on their student loan payments, though the actual numbers could potentially run into the millions.

In response, student loan servicers are resorting to automatic administrative forbearance to buy themselves time to fix these payment calculations.

The reasons behind incorrect payment amounts from servicers vary. Government officials cite errors, delays, bureaucracy, and illegal actions harmful to borrowers. Servicers blame the government and a lack of funding to properly do their jobs. Additionally, many borrowers have new loan servicers and have transitioned to the new SAVE plan, complicating matters even further.

Being placed in automatic forbearance when you haven’t requested it can be stressful, confusing, and time-consuming. To keep our users informed and protected, our team put together some important information about the ins and outs of being in forbearance and steps you can take to manage your loan effectively.

So, why administrative forbearance and what does this mean for you?

Servicers new to managing accounts pulled in old information to calculate payments, not taking in the new poverty line adjustment into account with calculating SAVE payments. Additionally, many borrowers were incorrectly put into into standard repayment plans, resulting in requests for initial payments that were often hundreds of dollars more than expected.

Servicers are implementing automatic administrative forbearance to give themselves time to fix the calculations. Administrative forbearance is a type of payment status that puts a temporary pause on payments of federally held student loans but doesn't have interest subsidy.

Administrative forbearance is important for those seeking Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) forgiveness. New regulations implemented in July 2023 take this period of forbearance into account and ensures the payments count towards PSLF forgiveness. It will likely count towards IDR forgiveness as well under new regulations. However, while we expect this part of the new IDR regulations to be a apart of those benefits that immediate effect, that is not yet confirmed. So, there is a possibility that payments under administrative forebearance will not count towards IDR forgiveness until July 2024.

How the three biggest loan servicers are implementing automatic forbearance.

MOHELA realized the problems right away and were the first to broadly use administrative forbearance in response to a backlog of paperwork and payment miscalculations. Nelnet has also been reported to adopt this process, although they have also asked borrowers to make payments under a standard plan until their paperwork is processed. Aidvantage is implementing the forbearance at scale as well, often with extremely lengthy forbearance timelines.

Most administrative forbearances should last a couple of months while servicers get things in order, and you can expect more updates to come as they sort this out.

At Chipper, we understand how crucial it is to have transparency and accurate payment information. Our members have access to the status of their loans and accurate payment amounts in the Chipper app.

Use Chipper for Lower Payments

Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

Use Chipper for Teacher Loan Forgiveness (TLF)

The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

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