GAO: FSA Halted Student Loan Servicer Reviews

The federal government quietly stopped independently checking whether student loan servicers are keeping accurate borrower records (and stopped monitoring the quality of calls with borrowers) in February 2025. More than a year later, it still has not resumed those reviews, according to a new report released by the Government Accountability Office.

The findings come at a precarious moment for the nearly 43 million Americans with federal student loans. Major repayment plan changes are underway, millions of borrowers are in or approaching default, and the very oversight designed to catch servicer errors has gone dark.

For an administration that is allegedly focused on reducing waste and fraud, it’s concerning that government contractors overseeing a trillion dollar portfolio of loans impacting 43 million Americans are not being closely monitored or held accountable. 

What FSA Stopped Directly Monitoring

The Department of Education’s Office of Federal Student Aid contracts with five private companies to service the federal student loan portfolio: Aidvantage, CRI, EdFinancial, MOHELA, and Nelnet. These servicers handle billing, process loan payments, maintain borrower records, and field borrower calls about repayment options and forgiveness programs.

Under the existing contracts, FSA is required to conduct quarterly performance reviews across six metrics: accuracy, call quality, call abandon rate, customer satisfaction, timeliness of completion of certain servicing tasks, and financial monitoring. If servicers fall short of standards, FSA can levy financial penalties.

In February 2025, assessments specifically related to Accuracy and Call Quality were stopped. “Accuracy” refers to ensuring that data for borrowers in loan servicers’ systems matched the data in FSA’s systems. The goal is to ensure accurate records. “Call Quality” is when FSA would review borrower phone calls and determine if the loan servicers were providing good and accurate customer service.

According to the GAO report, agency officials said the suspension was due to “lack of FSA staff capacity” — a problem that traces directly to workforce cuts that began when the Trump administration issued directives to downsize and eliminate the Department of Education.

FSA started 2025 with 1,433 employees. By December, that number had fallen to 777 –  a 46% reduction. The assessments that stopped happening, the GAO noted, are “more labor-intensive than other types of oversight that have been automated.”

In September 2025, FSA officials told the GAO the agency was exploring “more efficient oversight methods” and possible changes to performance standards. But as of December 2025, no replacement methods had been implemented, and no changes to performance standards had been made.

What The Department of Education Is Doing

The Department of Education says it is focused on loan servicer performance.

According to a statement provided to The College Investor by Ellen Keast, Press Secretary for Higher Education, “FSA utilizes a variety of methods to rigorously assess loan servicer call quality and accuracy. As detailed in ED’s response to GAO, the agency uses data quality assessments, cross-system assessment data validation, daily and weekly performance reporting from servicers, weekly executive level check-in meetings, and borrower satisfaction surveys to monitor and improve the customer service delivered by our vendors. The Under Secretary and Acting COO have also visited loan servicers personally, unlike the previous Administration, to deepen these important agency partnerships.“

In that response to the GAO, the Department of Education determined that “a better approach is to provide substantial oversight through additional activities that measure the accuracy of servicer data and the quality of their performance. For example, 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.“

However, Representative Robert C. “Bobby” Scott said in a statement, “The Education Department (ED), in its oversight of the $1.6 [trillion] student loan portfolio, is required by law to ensure that student loan servicers provide borrowers with accurate information about their loans. 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. Especially because, when ED conducted oversight under the Biden administration, it issued penalties to servicers when it found four out of five failed to meet basic accuracy standards. Moreover, I am gravely concerned that ED incorrectly believes it can replace real oversight of servicers with untested automation or artificial intelligence.“

Related: Google AI Incorrect In 37% Of Personal Finance Related Questions

Student Loan Servicers Were Already Falling Short Before Oversight Ended

A big concern is that multiple loan servicers were already having problems before the performance reviews stopped.

The GAO found that, in the two quarters FSA managed to assess servicers before halting the reviews, four of the five contractors failed to meet accuracy performance standards. Those failures triggered financial penalties totaling approximately $850,000. Two servicers performed poorly enough to receive the maximum allowable penalty.

The Department of Education’s independent financial auditor separately reported as recently as January 2026 that the department “continued to have a material weakness related to the reliability of its student loan data” — a significant red flag from an agency’s own watchdog.

The difference between loan servicer data and StudentAid.gov data has been well documented on social media. On Reddit, borrowers consistently ask questions about discrepancies between the two, such as payment due dates and loan status issues.

And data provided as evidence in a recent lawsuit against MOHELA shows that several loan servicers are having call time issues that could be impacting borrowers:

Without independent audits that actually listen to borrower calls and review the data, the federal government has no way to verify that the problems it previously identified have been resolved — or that new ones haven’t emerged. 

The Financial Accountability Gap

Beyond borrower servicing issues, the GAO flagged a fiscal concern for taxpayers. The oversight gap doesn’t just affect borrowers — it means FSA may be overpaying servicers for subpar performance.

The financial penalties built into the servicer contracts exist precisely because servicer performance has historically been uneven. Without assessments, FSA cannot accurately determine whether servicers are meeting contractual standards. That means the penalty mechanism (the government’s primary financial lever over servicer behavior) has effectively been disabled.

And it’s not like this hasn’t happened before. Navient was banned from federal loan servicing, and it recently paid out $100 million in borrower compensation.

The GAO recommends that FSA resume both the accuracy and call quality assessments. The agency formally disagreed with that recommendation, stating “those metrics do not meaningfully measure servicer performance and will not improve the financial health of the federal student loan portfolio“.

However, it’s hard to see how getting borrowers quickly re-enrolled in repayment plans would not improve the financial health of the federal student loan portfolio – especially as nearly 7 million SAVE plan borrowers may need assistance to do so in the coming months.

What This Means For Borrowers

The practical consequences of inaccurate servicer records can range from inconvenient to financially damaging. According to the GAO, errors can result in borrowers being billed for incorrect amounts or placed in the wrong repayment status.

Call quality lapses carry a separate set of risks. Borrowers who call their servicer for guidance on repayment plans or loan forgiveness programs may receive wrong information, and many borrowers won’t realize it.

The stakes are especially high right now. Some 7 million borrowers who enrolled in the Biden-era SAVE repayment plan are going to have to change repayment plans soon. There’s also concern that millions of borrowers are in default or approaching it. 

Starting in July 2026, the One Big Beautiful Bill Act will introduce the new Repayment Assistance Plan (RAP) while starting to phase out others, requiring millions of borrowers to make decisions.

The bottom line is, as Senator Bernie Sanders explains, “The Education Department’s refusal to conduct oversight of student loan servicers is a dereliction of duty.“

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