Over 50 Lawmakers Urge ED to Review MOHELA’s Performance
By Maria Carrasco, NASFAA Staff Reporter
Over 50 members of Congress on Tuesday sent a letter to the Department of Education (ED), urging the department to “immediately review” its contract with the Higher Education Loan Authority of the State of Missouri (MOHELA), claiming that the servicer mishandled its student loan servicing responsibilities.
This letter, led by Sen. Elizabeth Warren (D-Mass.) and Rep. Jim Clyburn (D-S.C.), comes after Warren and other Democratic senators released a report in April listing several issues borrowers had during the return to student loan debt repayment. That report alleged MOHELA miscalculated approximately 280,000 bills for borrowers already enrolled in the Saving on Valuable Education (SAVE) repayment plan.
Earlier in July, the American Federation of Teachers (AFT), the second largest teacher's labor union in the U.S., filed a lawsuit against MOHELA, alleging that the loan servicer 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 last week, the Project on Predatory Student Lending filed a separate lawsuit against MOHELA, alleging that the servicer failed to implement student loan discharges ordered by ED.
The lawmakers wrote that the lawsuits, along with the report released by Warren, “raise even more concerns that MOHELA is wildly mismanaging its student loan portfolio and hurting borrowers.”
Additionally, while the lawmakers are “encouraged” that ED has withheld $7.2 million in payments from MOHELA last October, and transferred one million borrower accounts away from MOHELA this April, the letter urges the department take “even greater measures to protect borrowers from MOHELA’s abuses.”
“We request that ED immediately conduct an evaluation of MOHELA’s fulfillment of its contractual obligations as a servicer, share key data with our offices and federal and state regulators, and act quickly to apply corrective measures – including the potential termination of MOHELA’s federal contract if such action is justified,” the lawmakers wrote.
The letter listed several requests for information from ED on MOHELA’s performance.
The National Consumer Law Center, the Project on Predatory Student Lending, and the Student Borrower Protection Center applauded the letter, saying they’re thrilled a coalition of lawmakers “stand in solidarity with the millions of student loan borrowers calling for accountability.”
“Despite receiving hundreds of millions in taxpayer dollars each year, MOHELA’s servicing of student loans has been an utter failure and borrowers are being forced to pay the price,” the statement read. “It is long past time for ED to conduct a robust review of MOHELA’s failures.”
A MOHELA press release, issued late Tuesday evening, disputed the lawsuit's allegations, arguing that they would be proven to be without merit in court, and cited its 40-year track record of servicing student loans.
"No servicer in the history of the Public Service Loan Forgiveness (PSLF) program has processed the forgiveness of more loans held by teachers and other public servants than MOHELA," the statement reads. "We are committed to providing the highest quality of customer service to the borrowers that we serve. We are proud of our work and our record, and we will vigorously defend it."
Publication Date: 9/12/2024
Ben R | 9/13/2024 10:30:22 AM
As we know from working in financial aid, simply receiving a lot of complaints is not always indicative of job performance, but often exposes a mismatch between expectations and reality.
Part of what they are accused of includes collecting student loans that were in fact due, being proactive with income recertification and changing amounts due based on conflicting messaging from the department.
David S | 9/12/2024 10:22:22 PM
Darren - those "pointing fingers" here are members of Congress, the American Federation of Teachers and the Project on Predatory Student Lending, not the Department of Education. Could you provide more specific information that explains how the loan servicing mismanagement on the part of MOHELA (some alleged, some already determined to have taken place) is the fault of ED?
Darren C | 9/12/2024 10:47:15 AM
The federal government is always pointing fingers at everyone else other than themselves. The department of ED is at the core of all of these contracts, and sets the rules and obligations for federal loan servicing companies. If anything, Mohela's results are a direct reflection of the complete mismanagement of the federal student loan system by the department of ED. Start at the source. At this point, removing would Mohela would add more destabilization to an already awful situation hurting student loan borrowers yet again.
Joseph W | 9/12/2024 9:37:50 AM
While they're at it, perhaps these 50 members of Congress should also take action against the incompetency of the Department of Education.
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