Nelnet Servicing, LLC, one of the largest student loan servicers in the United States, is the subject of a class action lawsuit filed by student loan borrowers alleging widespread mismanagement of income-driven repayment (IDR) plans and borrower communication violations. The lawsuit claims that Nelnet systematically failed to process IDR applications and recertifications on time, causing borrowers to lose benefits, pay increased interest, and delay loan forgiveness.
Background of the Nelnet Class Action Lawsuit
The class action lawsuit, Johanson et al. v. Nelnet et al., was filed in 2020 in the U.S. District Court for Nebraska. It originated when borrowers like Andrew Johanson experienced repeated delays, misapplication of payments, and wrongful switches from income-driven to standard repayment plans despite submitting timely documentation. Borrowers argue that these systemic errors led to significant financial harm.
The case has expanded to encompass multiple borrowers from various states alleging similar treatment, highlighting the broader challenges and flaws in federal student loan servicing practices.
Parties Involved
- Plaintiffs: Borrowers enrolled in income-driven repayment plans serviced by Nelnet.
- Defendant: Nelnet Servicing, LLC.
Details of the Lawsuit Allegations
- Failure to timely process borrower applications for income-driven repayment plans and annual recertifications.
- Wrongful denial or delay of loan modifications resulting in higher monthly payments and accrued interest.
- Unauthorized involuntary placement of borrowers into forbearance status with penalties.
- Failure to provide required notices and disclosures about repayment plan eligibility and consequences of missed deadlines.
- Negligent misrepresentation of borrower accounts and balances.
Legal Claims and Relevant Laws
The class action lawsuit asserts claims for breach of contract related to promissory notes, negligent misrepresentation, and violations of state consumer protection laws, including deceptive practices statutes. The lawsuit focuses heavily on Nelnet’s obligations under federal regulations governing student loan servicing, especially rules related to income-driven repayment plans overseen by the Department of Education.
Health, Financial, Social, or Industry Impact
Financially, the lawsuit seeks compensation for increased interest costs, delayed loan forgiveness, and other monetary harms suffered by borrowers. The inability to access affordable repayment options burdens borrowers, negatively impacting their economic stability and mental health.
Socially, the case highlights systemic issues in the student loan servicing industry, triggering calls for reform and stronger regulatory oversight to protect borrowers from predatory or negligent servicing practices.
Current Status and Recent Developments
As of 2025, the lawsuit has survived motions to dismiss and is moving through discovery phases. Courts have recognized the plausibility of plaintiffs’ allegations, allowing the case to proceed. The class action seeks certification to represent thousands or potentially hundreds of thousands of affected borrowers nationwide.
Regulatory agencies and state attorneys general continue to scrutinize Nelnet, resulting in multi-million dollar settlements and mandates to improve communication and borrower support practices.
Consumer Advice and Business Consequences
Borrowers currently serviced by Nelnet are advised to maintain careful records of communications and payments, stay informed about repayment plan recertification deadlines, and consult financial or legal advisors if they experience servicing issues. Consumers should also monitor settlement announcements to participate if eligible.
For loan servicers, the lawsuit underscores the importance of compliance with federal servicing standards, transparent borrower communication, and efficient processing of repayment plans to reduce litigation risks and rebuild borrower trust.
Conclusion: Significance and Future Outlook
The Nelnet class action lawsuit represents a critical effort to address systemic problems faced by student loan borrowers within the servicing industry. Its ongoing litigation and related regulatory actions may significantly influence future student loan servicing practices, enhance borrower protections, and drive improvements in fair, accessible repayment plan administration nationwide.
