Aidvantage, the federal student loan servicing brand run by Maximus Federal Services, has been the target of a class action settlement over illegal debt collection, a $2 million federal penalty for botched billing, sustained congressional scrutiny, and ongoing litigation that dictates how the company handles income-driven repayment and borrower defense claims. The lawsuits against Aidvantage matter to the roughly 9 million borrowers whose loans it services, because the rulings and settlements have already changed what the company can be sued for and what it must do next.
Bodor v. Maximus: Borrowers Can Sue the Servicer
The most consequential case against Aidvantage’s parent is Bodor v. Maximus Federal Services, Inc., which a federal court approved in February 2024 as what advocates called a “first-of-its-kind class action settlement.”1Student Borrower Protection Center. Advocates Celebrate First-of-Its-Kind Class Action Settlement in Bodor v. Maximus The plaintiff, Jaimaria Bodor, alleged under the Fair Debt Collection Practices Act that Maximus illegally seized her tax refund even though she was entitled to debt relief as a victim of fraud by the Corinthian Colleges chain.
The pivotal ruling came before settlement: the court rejected Maximus’s argument that its status as a government contractor gave it sovereign immunity from suit. That decision established that federal loan servicers can be held liable for unlawful collection practices, opening the door to further borrower litigation against Maximus and other contractors.1Student Borrower Protection Center. Advocates Celebrate First-of-Its-Kind Class Action Settlement in Bodor v. Maximus
The $2 Million Billing Penalty
On January 5, 2024, the Department of Education announced it was withholding payments from three servicers for failing to send timely, accurate billing statements to a combined 758,000 borrowers as federal repayment restarted. Aidvantage took the largest hit: $2 million withheld, compared with $161,000 from EdFinancial and $13,000 from Nelnet, with the amounts scaled to the number of borrowers affected at each company.2Government Executive. Education Withholds Payments From Student Loan Servicers3Higher Ed Dive. Education Department Withholds $2.2M From 3 Student Loan Servicers
The Department ordered all three servicers to place affected borrowers into administrative forbearance with interest reduced to zero until the billing errors were fixed. A Maximus spokeswoman said the 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.”2Government Executive. Education Withholds Payments From Student Loan Servicers
Congressional Scrutiny and Service Failures
Aidvantage has been on Senator Elizabeth Warren’s radar since Maximus took over Navient’s federal portfolio in October 2021. Warren questioned the company’s “troubled history” in a 2021 letter and pressed for borrower protections during the transfer of 5.6 million accounts.4U.S. Senate — Senator Elizabeth Warren. Warren Questions Maximus’s Troubled History
In September 2023, Warren joined Senators Van Hollen, Markey, and Blumenthal in writing to Maximus CEO Bruce Caswell, demanding data on call wait times, call abandonment rates, and account access. The senators cited reports that Aidvantage’s website was crashing under repayment-restart traffic and that the company lacked accurate contact information for roughly 14,000 transferred borrowers.5U.S. Senate — Senator Elizabeth Warren. Letters to Student Loan Servicers
Performance data the Department later provided to Congress bore out the concerns. Aidvantage’s customer service scores ran around 55 to 58 percent against a 70 percent target during 2023, and its call abandonment rate spiked to 34.3 percent in the third quarter, well above the 8 percent threshold. Where borrowers did get through, the company scored well on accuracy and interaction quality.6U.S. Senate — Senator Elizabeth Warren. Department of Education Response on Loan Servicer Oversight
Overcharges Documented by Regulators
The CFPB’s 2024 annual student loan ombudsman report, covering July 2023 through June 2024, documented specific overcharges by Maximus Federal Services. In one case the company withdrew $6,897 through auto-pay from a borrower who owed only $1,048, acknowledging the error and offering a refund more than a month later. In another, Maximus withdrew nearly double a borrower’s payoff balance and said a refund could take up to 12 weeks.7Consumer Financial Protection Bureau. 2024 Annual Student Loan Ombudsman’s Report
California’s student loan ombudsman logged 31 complaints against Aidvantage in 2024, making it the state’s second-most-complained-about servicer behind MOHELA. Across servicers, the top complaint categories were failure to maintain accurate account records, failure to process paperwork on time, and failure to deliver military, public service, or disability benefits that borrowers were entitled to.8California DFPI. 2024 Annual Report of the Student Loan Ombudsman
Lawsuits That Now Dictate What Aidvantage Must Do
Sweet v. McMahon: Borrower Defense Deadlines
Aidvantage is one of the servicers implementing the Sweet v. McMahon settlement for students defrauded by for-profit colleges. The case had delivered relief to more than 271,000 borrowers by May 2025 and requires the Department to adjudicate remaining claims on a set schedule. In April 2024, the court ordered biweekly in-person meetings between the Department, servicers including Aidvantage, and plaintiffs’ counsel; by March 2025, servicers were being required to report phone wait times, response times, and complaint backlogs.9PPSL. Sweet v. McMahon
In December 2025, Judge William Alsup denied the Department’s request for an 18-month extension to resolve roughly 207,000 post-class claims, setting deadlines of January 28, 2026, for schools with identified misconduct and April 15, 2026, for all others.10Higher Ed Dive. Education Department Delay Declined in Sweet Settlement The court denied a further delay in February 2026, and the Ninth Circuit refused to stay relief pending appeal in March 2026.9PPSL. Sweet v. McMahon
AFT v. U.S. Department of Education: IDR Applications
The American Federation of Teachers sued the Department of Education in March 2025 after it removed the income-driven repayment application from its website and directed servicers, Aidvantage included, to stop processing IDR applications.11Student Borrower Protection Center. AFT v. U.S. Department of Education The portal reopened later that month, and servicers were expected to resume processing new applications by May 10, 2025.12NASFAA. ED Files Memorandum in Opposition to AFT IDR Lawsuit
The case became a class action in September 2025. The following month, the parties reached a settlement in which the administration agreed to cancel debt for eligible borrowers in income-based, income-contingent, Pay-As-You-Earn, and PSLF programs, process IDR and PSLF buyback applications, and refund borrowers who had paid after becoming eligible for discharge. Judge Reggie B. Walton adopted the agreement on October 23, 2025, and stayed the case pending compliance, with six monthly status reports required.13Civil Rights Litigation Clearinghouse. American Federation of Teachers v. U.S. Department of Education14American Federation of Teachers. Following Lawsuit, Trump Administration Agrees to Deliver Student Debt Relief
The SAVE Plan Wind-Down and What It Means for Aidvantage Borrowers
State-led litigation ended the SAVE repayment plan. Injunctions in mid-2024 placed enrolled borrowers into a “litigation forbearance” at zero percent interest, and in February 2025 the Eighth Circuit ruled the plan unlawful. Interest resumed accruing on August 1, 2025.15U.S. Department of Education. U.S. Department of Education Continues to Improve Federal Student Loan Repayment Options
On December 9, 2025, the Department settled with Missouri and other states to formally end SAVE. New enrollments stop, pending applications are denied, and current enrollees will move to other plans. No loans will be forgiven under SAVE. The Department also agreed to notify the Missouri Attorney General before canceling more than $10 billion in federal student loans in any single month, a requirement lasting ten years.16TICAS. Dept. of Ed Announces End of SAVE Plan
Starting July 1, 2026, Aidvantage and other servicers must send SAVE-enrolled borrowers a notice giving 90 days to select a new plan. Borrowers who don’t choose will be moved automatically to the Standard Repayment Plan or the new Tiered Standard Plan. Two new options, the Repayment Assistance Plan and the Tiered Standard Plan, launch that same day.17U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan Advocates have noted that the transition faces a backlog of repayment plan applications and wait times of up to six months for assistance from some servicers, Aidvantage among them.16TICAS. Dept. of Ed Announces End of SAVE Plan Time spent in the SAVE forbearance does not count toward IDR or PSLF forgiveness, though PSLF borrowers can use the buyback option to receive credit for those months.18Federal Student Aid. IDR Court Actions