The U.S. Department of Education’s own watchdog found that the federal agency failed to act when it uncovered repeated servicing errors at private contractors working with student borrowers who owe more than $1 trillion in school debt, according to a wide-ranging Inspector General’s report released Thursday.

Servicing mistakes can cause student’s loans to balloon. Students may also lose out on debt-forgiveness, or see their credit scores spiral downward.

Among contractors evaluated in the 48-page report was FedLoan, part of the Pennsylvania Higher Education Assistance Agency in Harrisburg, with 3,000 state employees.

FedLoan employees had the highest call fail rate -- which meant that they failed to give good information on repayment options to struggling student borrowers -- when they were were monitored by the education department IN April and May 2017.

FedLoan’s failure rate was 10.6 percent in April 2017, more than double the average of 4.3 percent for all services.

FedLoan services about $320 billion in federal student debt.

Keith New, spokesman for FedLoan and PHEAA, said the agency “welcomes this type of analysis” and that, over the last two years, the agency has spent millions of dollars to “transform our technology and processes to improve quality across the board.”

The education department also listened to more borrower calls at FedLoan than other servicers, producing a “statistical imbalance” when comparing its performance, New said.

Education department spokeswoman Liz Hill disagreed on Thursday with the inspector general’s findings that “we do not have processes and procedures in place to ensure loan servicing vendors provide high-quality, compliant service to borrowers.”

She added that “we also are continuously looking for ways to improve” as the agency modernizes its operations.

Seth Frotman, a former top student loan regulator at the Consumer Financial Protection Bureau and borrower advocate, said that the report showed that the education department was “asleep at the wheel” in oversight responsibilities.

“It’s crystal clear that the federal government is doing nothing to help student borrowers,” Frotman said.

Pennsylvania Attorney General Josh Shapiro has sued one of the nation’s largest servicers, Navient Corp., in federal court in Harrisburg. Navient has operations in Wilmington and Wilkes-Barre. Thursday’s report showed that the company had an above average call fail rate in the two months that compared servicers in 2017.

“Today’s IG report repeats the mistakes in a 2017 [Federal Student Aid] review that FSA later acknowledged after learning more information about individual borrowers’ situations,” Navient said in a statement. “It is a fact that FSA only requested to review calls of five minutes or less, and concluded Navient counseled the borrowers appropriately. This report also shows that Navient had among the highest compliance rates.”

In addition, “Navient’s overall use of forbearance was consistent with that of other servicers, while the duration of forbearances for Navient borrowers was actually among the lowest of the department’s nine servicers. Further analysis by FSA determined that Navient also had among the highest ‘take-up’ rates for income-driven repayment plans, as well as longer-than-average call duration in comparison to all servicers. We will be contacting the IG to help them understand the facts," said Navient.

Other servicing companies, including PHEAA, have faced lawsuits from borrowers who claim they were wronged.

In 2009, the Education Department contracted with what have become the nation’s largest student loan servicers: Great Lakes Educational Loan Services (Great Lakes); Navient; Nelnet Servicing, and Pennsylvania Higher Education Assistance Agency (PHEAA).

From 2011 through 2013, the federal agency contracted with 11 more servicers as the number and value of the loans in the federal portfolio mushroomed, including Aspire Resources, the Utah Higher Education Assistance Authority and the Oklahoma Student Loan Authority.

The inspector general’s report noted that the Federal Student Aid office “did not track all identified instances of noncompliance and rarely held servicers accountable.”

The Federal Student Aid’s office reviewed servicer operations in 2015, 2016 and much of 2017, and found that 61 percent of its evaluations found servicer failures.

A copy of the full report is available at the Inspector General’s website: