MOHELA Lawsuit Claims Servicer Misled and Overcharged Borrowers
By Maria Carrasco, NASFAA Staff Reporter
The American Federation of Teachers (AFT), the second largest teacher's labor union in the U.S., on Monday filed a lawsuit against the Higher Education Loan Authority of the State of Missouri (MOHELA), claiming that the loan servicer allegedly illegally overcharged borrowers on their monthly student loan bills, failed to timely process paperwork, delayed their path to loan forgiveness, and actively misled borrowers.
In the lawsuit, AFT is represented by the Student Borrower Protection Center (SBPC), National Consumer Law Center (NCLC), and Selendy Gay PLLC. According to these organizations via a fact sheet, MOHELA allegedly followed 10 different illegal servicing practices that harmed millions of borrowers.
Those alleged practices include: illegally deducting payments from borrowers’ bank accounts without borrowers’ consent; failing to send borrowers’ bills on time, which caused “800,000 borrowers to fall behind” on their payments; sending borrowers inaccurate bills, which caused borrowers to pay more on their monthly student loan bills; misinforming borrowers about paperwork deadlines to remain in affordable repayment plans; and more.
AFT President Randi Weingarten said in a statement that MOHELA is now starting to “mimic the callous practices of its disgraced forerunner Navient: incompetence, malfeasance, and blatant disregard for borrowers’ right.”
“MOHELA was hired by the federal government to help borrowers pay down debt, but instead it hung them out to dry to line its own pockets,” Weingarten said in a statement. “Rather than fulfill its responsibilities, MOHELA has abdicated and deflected them — and it’s well past time it’s held to account.”
A MOHELA spokesperson on Tuesday told NASFAA that “providing support to student loan borrowers is the utmost priority to MOHELA, and any claims to the contrary are false.” Further, “MOHELA will vigorously defend against the allegations in the complaint,” the spokesperson said.
Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), along with Senate Majority Leader Chuck Schumer (D-N.Y.), on Monday responded to AFT’s lawsuit, stating that MOHELA has a “long history of prioritizing their own profits over servicing hard-working borrowers.” The senators also noted that earlier this year, they called on the Consumer Financial Protection Bureau (CFPB) and state Attorneys General to investigate MOHELA.
Additionally, the senators called on the Department of Education (ED) to take action to “hold MOHELA responsible for its harms and to protect borrowers from future abuses.”
In April, Warren, chair of the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Economic Policy, led a hearing questioning student loan experts and stakeholders about the performance of MOHELA. And in May, Warren and Sanders along with other Democratic senators sent a letter to Education Secretary Miguel Cardona asking the department to hold MOHELA “accountable for its failures using the full extent of your authority.”
Publication Date: 7/24/2024
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