A new federal watchdog report is raising concerns over how major changes to the student loan system are being implemented under the Trump administration.

The Government Accountability Office (GAO) released a report on Thursday warning that communication breakdowns between the U.S. Department of Education and its loan servicers can trigger billing errors, delays and confusion for millions of borrowers.

The report specifically examined how the Education Department coordinates with the four companies that manage federal student loans: Nelnet, Aidvantage, MOHELA and EdFinancial.

The watchdog found that all four servicers experienced difficulties carrying out program changes because they often received unclear instructions from the department, resulting in repeated rounds of clarification before updates could be implemented.

“The lack of clear up-front instruction sometimes resulted in extensive back-and-forth between Education and servicers,” the report said.

“All four servicers raised concerns about the number of clarifying questions they needed answered to implement some requested changes.”

Why It Matters

Millions of Americans are already navigating significant changes to the federal student loan system, including new repayment options and servicing updates.

Based on the GAO’s findings, the Education Department may not be providing clear instructions to loan servicers, eventually leading to billing mistakes or delayed communications with borrowers.

The federal government and its contractors administer about $1.6 trillion in student debt for about 43 million borrowers nationwide.

What To Know

According to the report, the Department of Education communicates new requirements to servicers through formal "change requests," which can range from routine borrower notifications to repayment plan overhauls.

Servicers told investigators that some requests lacked sufficient detail, forcing them to seek additional guidance and slowing the overall implementation.

In one example from the GAO, a single change request generated six rounds of questions and answers over a two-month period before the requirements were fully understood.

“I wouldn't say the Trump admin created this problem. But it sure has made an existing weakness much more consequential,” Michael Ryan, finance expert and founder of MichaelRyanMoney.com, told Newsweek.

“The GAO found that Education sometimes gives servicers incomplete instructions, forcing repeated rounds of questions before they can correctly update accounts, billing systems, and borrower communications. The coordination process is ad hoc and informal. There's no written rule for when they are supposed to loop servicers in early. That's a longstanding operational gap.”

The agency said the communication coordination problems can have real-world consequences for borrowers.

Delays in implementing program changes may postpone important communications and even result in inaccurate billing information that servicers must later correct.

“This is fundamentally an execution problem. If you're changing the rules governing 43 million loans, the people administering those rules need clear instructions before borrowers see the consequences,” Ryan said.

“A servicing mistake isn't just paperwork. An incorrect payment amount or repayment status can disrupt a household budget or delay forgiveness credit. The borrower ends up absorbing the cost of the government's coordination failure.”

To address the problem, the GAO recommended that the Federal Student Aid office establish criteria for determining when it should begin discussions with servicers before major changes are rolled out. The watchdog said early coordination would be especially important for complex policy changes or those that must be implemented on tight deadlines.

What Does the Department of Education Say?

Newsweek reached out to the Education Department for comment.

“The GAO report further underscores how chaotic and ineffective the Biden Administration’s unlawful efforts to install mass student loan forgiveness were,” Ellen Keast, press secretary for higher education, told Newsweek.

“In less than a year, the Trump Administration implemented some of the most sweeping higher education reforms in decades — in partnership with servicers. To date, more than one million borrowers have left the unlawful SAVE Plan and nearly a million borrowers have enrolled in auto-pay. This success did not happen by accident, it’s because we cultivated a productive partnership with our servicers.”

In the GAO report, servicers told investigators that earlier engagement could help them prepare staff, update systems more efficiently and better communicate changes to borrowers.

One servicer said it was given only one business day to update the way borrowers could track qualifying payments toward loan forgiveness.

What Happens Next

The GAO has recommended that the Department of Education's Federal Student Aid office develop formal criteria for when it should begin coordinating with loan servicers before major program changes are rolled out.

“Communication and oversight problems may not be isolated mistakes but results of a system that has been forced to implement massive repayment changes on extremely compressed timelines,” Alex Beene, financial literacy instructor at the University of Tennessee at Martin, told Newsweek.

Contact Newsweek editors on this story: Edward T. Cummins.