Federal student loan system faces repayment errors and disbursement delays

The federal student loan system is facing significant disruptions due to new regulations and technical glitches. Recent changes following the One Big, Beautiful Bill Act have restructured repayment plans, in some cases resulting in much higher monthly payments for borrowers.

Advocacy groups, including the Debt Collective, have reported widespread servicing errors. These include incorrect monthly payment estimates, the sudden erasure of Public Service Loan Forgiveness (PSLF) credits, and inaccurate notifications from servicers like MOHELA. The Department of Education has acknowledged that some borrowers received inaccurate payment estimates.

Additionally, many students have experienced significant delays in receiving federal loan disbursements. These delays, linked to system updates required by new federal rules, have caused financial instability for students relying on aid for housing and living expenses. Experts express concern that these issues could impact student enrollment and food or housing security if they persist into the fall semester.