Report: Massive Glitch In Student Loan Transfers Affects Millions Of Borrowers’ Credit Scores

After taking steps to purchase her first home, one student loan borrower discovered a glitch in the system that negatively impacted her credit score. Upon conducting online research, she found that many others were experiencing the same issue.



Everything was falling into place for Alexandra Pimentel on her journey to becoming a homeowner until she checked her credit report and realized she owed double the amount of her student loans, which totaled $45,000, according to a story in The Washington Post .



Pimentel’s credit report showed one balance under her current student loan servicer, Missouri Higher Education Loan Authority (MOHELA), and another under her previous provider, Nelnet, from which she had transferred the loan the previous month. A quick Google search revealed that others were facing the same issue. Although she was told the duplicate record would be removed in a few months, it did not happen.



Instead, roughly 1.4 million duplicate student loan records appeared on people’s credit reports. In the outlet’s investigation, three sources familiar with the situation, who were unauthorized to speak publicly, told The Post that “the number of affected people could be far greater as the problem is pervasive.”



Many borrowers are unaware that their student loan amounts may have been duplicated on their credit reports, even though their credit scores have dropped.



“This situation is dystopian,” said Pimentel. “It’s been going on for months and months despite everything I’ve done. It really destroys my trust in this entire process.”



After realizing that the error was not going away as promised, Pimentel filed a dispute with the credit reporting agency Experian in February 2024. She was told that the servicers were reporting the loan accurately and that nothing could be done.



From there, she contacted MOHELA. Pimentel was told to reach out to Nelnet. Taking matters into her own hands, Pimentel filed complaints against all three companies with the Consumer Financial Protection Bureau.



Finally, the investigation revealed that there was an error in the transfer of her loan, a problem affecting not only Pimentel but millions of others.



“It is so demoralizing that despite never missing a payment and getting all of my finances in order, I’ve been stuck in this position,” said Pimentel.



As detailed in The Post , the issue, caused by a glitch in the transfer of student loan accounts between servicing companies, stems from a change in how student loan services managed the government’s $1.6 trillion education loan portfolio beginning in 2021.



Previously, the servicer transferring the loan would close out any records associated with the account, known as a credit tradeline. The receiving servicer would then open a new one. However, this often prevented borrowers from disputing any earlier repayment history with the credit bureaus.



Within days of issuing guidance on the glitch, the student aid office requested Experian review accounts transferred between Nelnet and MOHELA, which had prompted the initial borrower complaints, three informed sources told The Post.



After discovering 1.4 million duplicate records, the credit agency is now expanding its review to include all student loan servicers.