Aidvantage Class Action Lawsuit: Bodor v. Maximus Settlement

The Aidvantage class action lawsuit is Bodor v. Maximus Federal Services, Inc., a federal case filed in December 2019 accusing Maximus — the contractor that operates the Aidvantage brand — of continuing to collect on federal student loans from borrowers whose collections were supposed to be paused while their fraud claims against their schools were pending. The court approved a class settlement on February 9, 2024, and the case was terminated the following month.¹²

What the Lawsuit Alleged

Jaimaria Bodor filed the original complaint on December 9, 2019, in the U.S. District Court for the Eastern District of Pennsylvania (Case No. 5:19-cv-05787), before Judge John Michael Gallagher. An amended class action complaint followed in May 2020.²³

The claim was simple. When a borrower submits a Borrower Defense to Repayment application — a request for loan cancellation on the ground that the borrower’s school defrauded them — federal rules require collection activity on that loan to stop while the application is pending. The complaint alleged Maximus kept collecting. Wage garnishments, tax refund offsets, and Social Security offsets continued against Bodor and borrowers in the same position. Bodor said Maximus seized her tax refund while her Borrower Defense application was pending.⁴¹

The suit was brought under the Fair Debt Collection Practices Act.⁴

Who Was Covered by the Class

The amended complaint defined the class as borrowers of Department of Education-owned federal student loans who, between December 9, 2018, and the date of trial, had tax refunds or other federal payments offset, or wages garnished, while they had a pending or approved Borrower Defense application, and who had not indicated on that application that collection could continue during review.³ Many class members had attended for-profit schools, including Corinthian Colleges.⁵

The Sovereign Immunity Ruling

Early in the case, Maximus argued it was shielded from suit by sovereign immunity because it works for the federal government. The court rejected that defense, ruling that a government contractor is not protected from liability for unlawful debt collection. Advocates described the ruling as the reason the case could reach a class settlement at all.¹

Settlement and Outcome

The court approved the class settlement on February 9, 2024, and the case was terminated on March 13, 2024.¹² Advocacy groups called it a first-of-its-kind result providing significant relief to borrowers, though the dollar value of the settlement fund was not detailed in the publicly available records.⁴

Plaintiffs were represented by the National Consumer Law Center, Justice Catalyst Law, and Flitter Milz, P.C.¹

Related Federal Enforcement Against Aidvantage

The Bodor settlement is separate from a Department of Education enforcement action the same year, but borrowers often encounter the two together. On January 5, 2024, the department announced it was withholding payments from three student loan servicers — Aidvantage, EdFinancial, and Nelnet — for failing to send timely and accurate billing statements to more than 750,000 borrowers during the first month of the return to repayment after the COVID-19 pause ended.⁶

Aidvantage’s penalty was the largest of the three: $2 million, compared to $161,000 for EdFinancial and $13,000 for Nelnet.⁷ The department ordered the servicers to place affected borrowers into administrative forbearance, adjust accrued interest to zero, and count that time toward Public Service Loan Forgiveness and income-driven repayment cancellations.⁶

Richard Cordray, then chief operating officer of Federal Student Aid, said the department would continue to “hold servicers to their contractual obligations and make sure borrowers are not harmed by these errors.” A Maximus spokeswoman said the billing issues had been resolved: “upon our identification of this issue, we took immediate action to rectify the error and prevent any risk of future occurrence.”⁷

Who Aidvantage Is

Aidvantage is the consumer-facing brand of Maximus Federal Services, a division of the government contractor Maximus, Inc. In October 2021, the U.S. Department of Education approved a contract novation transferring servicing of roughly 5.6 million federal student loan accounts from Navient to Maximus, along with about 800 former Navient employees.⁸⁹¹⁰ A 10-year, $16 billion contract finalized in spring 2023 cemented the arrangement.⁷

Maximus has publicly described itself as a servicer rather than a debt collector, and in the wake of critical reports called itself an “independent, conflict free provider” focused on the borrower experience.⁸¹¹

1
Student Borrower Protection Center. Advocates Celebrate First-of-Its-Kind Class Action Settlement in Bodor v. Maximus
2
CourtListener. Bodor v. Maximus Federal Services, Inc.
3
Justice Catalyst Law. Bodor v. Maximus Federal Services, Amended Class Action Complaint
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Justice Catalyst Law. Bodor v. Maximus Federal Services, Inc.
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Student Borrower Protection Center. Customer Disservice: Examining Maximus
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Fortune. Biden Administration Withholding Payments From Aidvantage, EdFinancial, Nelnet
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Government Executive. Education Withholds Payments From Student Loan Servicers
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Maximus. Maximus Federal Student Loan Servicing Contract Novation
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Federal Student Aid. Who Is Maximus Federal Services, Inc.
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Maximus Accountability Project. Maximus and Aidvantage
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Forbes. Bombshell Report Claims World’s Largest Student Loan Company Misled Student Loan Borrowers