Beyond the FAFSA Screw Up, There is This...

From the Washington Post:  

...At least 1.4 million borrowers have had duplicate balances on their credit reports, according to three people familiar with the matter who were not authorized to speak publicly. They say the number of affected people could be far greater as the problem is pervasive. Many borrowers have no idea this is happening, even as their credit score — a critical factor in determining how much you pay for car loans and mortgages — has declined.

The Education Department said it has received approximately 500 credit reporting complaints since December but cannot confirm how many are specifically related to the duplication issue. The department is providing a workaround for faster removal of the error but said a permanent solution will take time...

The problem is born out of a 2021 change in how student loan servicers that manage the government’s $1.6 trillion education loan portfolio report transferred loans to credit reporting agencies, such as Experian, Equifax or TransUnion. Before 2021, the servicer handing over the loan would close the records associated with the account — known as a credit tradeline — and then the receiving servicer would open another. But that sometimes prevented borrowers from disputing their prior repayment history with the credit bureaus.

Now, the Education Department wants the servicer receiving the student loan to submit a file — known as an L1 segment — to the credit agencies signaling the debt transferred from another servicer and the prior history should be retained. The problem is, sometimes that file does not get processed correctly by the credit agencies, according to the Education Department.

In guidance obtained by The Washington Post, the department’s Federal Student Aid office told student loan servicers this month that the processing errors are responsible for the duplicate records appearing on borrowers’ credit reports. There is no way for servicers to know that the file failed to process or a duplicate record exists, until a borrower complains or submits a dispute, according to the guidance...

Full story at https://www.washingtonpost.com/education/2024/05/29/student-loan-balance-duplicates-credit-reports/.