800,000 student-loan borrowers missed payments because their servicer failed to meet its 'basic obligation.' Here's what happens now.

• The Education Department withheld pay from MOHELA over failure to deliver on-time billing statements.
• The servicer's error impacted 2.5 million borrowers, and pushed 800,000 into delinquency.

President Joe Biden's Education Department revealed that a major student-loan company made errors with millions of borrowers' accounts.

On Monday, the department announced that it would be withholding $7.2 million in October pay from student-loan company MOHELA after it failed to send on-time billing statements to 2.5 million borrowers, resulting in over 800,000 of them being marked as delinquent on their balances.

Since federal student-loan payments resumed in October, borrowers have reported a range of issues regarding inaccurate billing statements and lost paperwork, and Monday's action marked the first oversight action the Education Department has taken against a servicer for widespread repayment errors.

"The actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures," Education Secretary Miguel Cardona said in a statement. "We are committed to fixing our country's broken student loan system, and that includes strengthening oversight and accountability and taking every step possible to improve outcomes for borrowers."

Here's what borrowers should know if they were impacted by MOHELA's payment errors.

Do I still have make payments right now?

No. The Education Department instructed MOHELA to place all affected borrowers on forbearances until the issues are resolved.

Additionally, the department said it identified errors from servicers "resulting in a small number of borrowers receiving incorrect payment amounts on their billing statements," along with borrowers who have pending borrower defense to repayment claims being incorrectly placed back into repayment. Those borrowers should be placed on forbearance, as well.

Borrowers who believe they should be placed on forbearance but are still in repayment status can contact their servicer or file a complaint with Federal Student Aid.

Will interest still accrue while I'm on forbearance?

No. Interest should not accrue on your loans while you are in administrative forbearance.

Will I still get credit toward loan forgiveness if I'm in forbearance?

Yes. Borrowers enrolled in Public Service Loan Forgiveness or an income-driven repayment plan will have any month spent in forbearance counted toward their forgiveness progress.

What's next?

The Education Department said that it will continue to monitor servicers' performance "and ensure they are meeting their basic contractual obligations to the Department and to borrowers. If a servicer fails to meet these basic obligations, additional action may be warranted by the Department."

It's unclear at this point how withholding pay from MOHELA will impact customer service operations. However, MOHELA told lawmakers and August that it expects customer service delays to extend into 2024 due to Congress not increasing funding for Federal Student Aid, which gives resources to services to carry out repayment operations.

The department also recently confirmed to Insider that 305,000 borrowers received inaccurate bills since payments resumed, saying that it's "working closely with student loan servicers to ensure that they are providing borrowers the information they need and holding servicers accountable when they do not."