Student Loan Forgiveness Reversed for One Borrower

New Jersey resident Richard Nardelli was overjoyed the day he found out his student loan debt had been forgiven under President Joe Biden's new income-driven repayment plan options.

Nardelli had amassed $79,480 in debt from attending culinary school at Rhode Island's Johnson & Wales University. Months later, he received some devastating news: A 1992 loan had never been erased and he owed more than $6,000.

Nardelli is one of the borrowers who he believes are being targeted by student loan servicers using "deceptive practices" and other types of misinformation to help pad their bottom line, even as the Biden administration looks to absolve many borrowers of their student debt.

The $6,000 debt alert was particularly shocking because Nardelli had received an official letter stating his loan had been forgiven.

"I was ecstatic beyond belief and now knew my financial future was even brighter with this anchor at my hip now gone," Nardelli told Newsweek. "I even received a refund from the Treasury Department due to overpayment on my loan for the past 20-plus years."

In January, he received a phone call from Edfinancial Services. The loan servicer told Nardelli his account still showed a past due balance.

"That made no sense since I stated to them my loan was forgiven in August of 2023 and your company sent me the notice," Nardelli said. "The agent then said this is just a glitch and it is an internal matter that needs to be cleaned up regarding reporting protocols and procedures."

On the phone call, Nardelli said, the agent told him his loan had been forgiven but the company just needed to clean things up on its end. When Nardelli asked for a written letter confirming what they had discussed, the agent denied the request but assured him he would not be liable for the amount owed.

Then a month passed and Nardelli received another letter saying he was behind on his loan. Once again, he spoke to an Edfinancial Services agent, who said there was no record of the loan being forgiven.

"The agent then says to me, 'This is what you owe on the loan and there is nothing you can do about it,'" Nardelli said.

Nardelli then spoke to an agent at the U.S. Department of Education who confirmed that his loan had been 100 percent discharged and that he had a zero balance. After calling Edfinancial Services once again and being put on hold several times, Nardelli finally got an apology and some semblance of an explanation.

"After being on hold, the agent comes back and now says, 'I am sorry. Yes, your loan was fully forgiven in August of 2023, but when you received your refund for overpayment on this loan in October of 2023, you were paid too much and you need to pay half of it back,'" Nardelli said. This included the 7 to 8 percent interest rate he had on his student loan.

While the agent told Nardelli he must have received two duplicate checks for his refund, Nardelli knew this never happened.

"I clearly explained to the agent the checks had two different account check numbers on them and when you deposit more than $10,000 into your bank account via one physical check the bank has to notify the Feds to make sure it is legit," Nardelli said. "That is why I was sent two checks."

Nardelli then had the bank verify that they were both real checks from the Department of the Treasury. Despite his repeated request for a letter confirming that his loan had been forgiven, he said, Edfinancial Services again refused.

"As this unfolded, I realized they were trying to scam, steal and attain some form of payment from me," Nardelli said. "I pulled my credit info from all three bureaus and low and behold Edfinancial Services had me as an open account that showed a current balance of $6,319. That is a very clever and under the radar scheme they have just initiated."

While Nardelli said the situation has frustrated him, he's not going to sit idly by as Edfinancial Services continues to ask for money he believes it isn't entitled to.

Edfinancial told Newsweek it couldn't provide any information about the specific borrower's account because of privacy laws but said it would reach out to the borrower to discuss his concerns.

"I am beyond enraged and angry, but they picked the wrong person to mess with," Nardelli said. "I am most concerned about Edfinancial Services attacking my credit integrity."

Today, Nardelli said he's filed complaints with both the Consumer Financial Protection Bureau and the U.S. Education Department's Office of Federal Student Aid. He is also filing a complaint with New Jersey's attorney general.

Nardelli said he doesn't sleep well now because of the stress surrounding the previously forgiven loan. He's gained weight and keeps "thinking the worst of this," he said.

"This company is trying to outright steal money," Nardelli said. "They know they are wrong. But they still are trying it anyway in all this mass confusion of the student loan servicing debacles you see in the news."

This isn't the first time a student loan borrower was told debt was cleared, only to be ordered to pay up months later.

Business Insider reported on a woman who had her $192,000 student loan forgiven until a letter from student loan servicer MOHELA said it was all an error.

Alex Beene, a financial literacy instructor for the state of Tennessee, previously told Newsweek that mistakes like this will become more common as new pathways to loan forgiveness are introduced at the federal and state levels.

A few months ago, Biden announced that 74,000 borrowers would see their student debt disappear, thanks to the Education Department offering an additional $5 billion in forgiveness. This was made available for 44,000 public employees and tens of thousands of borrowers who made at least 20 years of payments on income-driven repayment plans.

"Loan providers can have software that makes mistakes, and if they discover it, they'll definitely course-correct to collect," Beene told Newsweek.

Those who receive a letter claiming all of their debt is forgiven should double-check the fine print before celebrating, he added.

"It's a good idea as a borrower to check base with your loan provider when forgiveness is issued to make sure you meet all of the terms," Beene said. "It could not only save you the burden of having to pay down the line but the heartache that comes with it as well."

If you received a notice that your student debt was forgiven and then had it rescinded and would like to share your story, please contact personalfinance@newsweek.com.