During a Senate Banking hearing last month, Senator Reverend Warnock highlighted MOHELA’s role in blocking efforts to provide meaningful student relief

Senator Reverend Warnock, lawmakers: “Given the sheer scope of MOHELA’s documented billing errors, poor customer service record, and other problems, alongside the company’s decision to avoid public and private accountability at every turn, the Department of Education should take further action to hold MOHELA responsible for its harms and to protect borrowers from future abuses”

Washington, D.C. – Today, U.S. Senators Reverend Raphael Warnock (D-GA) and Elizabeth Warren (D-MA) led a growing coalition of Senators in urging the Department of Education Secretary Miguel Cardona (ED) to hold student loan servicer MOHELA accountable for its failures. The new letter from the lawmakers comes one week after ED announced that more than a million MOHELA borrowers will be transferred to other federal student loan servicers to “improve borrowers’ experiences”.

“We trust that ED and MOHELA will prioritize minimizing the processing delays and errors borrowers experience during the transfer,” The senators wrote in their letter to Secretary Cardona. “But ED must also act to impose accountability for MOHELA’s failures that occurred prior to this transfer.”

“Given the sheer scope of MOHELA’s documented billing errors, poor customer service record, and other problems, alongside the company’s decision to avoid public and private accountability at every turn, ED should take further action to hold MOHELA responsible for its harms and to protect borrowers from future abuses,” continued the lawmakers.

MOHELA’s failures were documented in a new report and most notably, MOHELA made over 1.5 million more billing-related errors than all other servicers combined. The servicer sent the wrong bills to approximately 280,000 borrowers and failed to send timely billing statements to 2.5 million borrowers, leading 800,000 borrowers to become delinquent on their loans. Then, MOHELA employed a “call deflection” scheme to push borrowers away from getting the help they needed.  

Additionally, new information provided by MOHELA to the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy only reinforces the need for ED to act. The company was paid nearly $180 million under its Direct Loan servicing contract in fiscal year 2023 and received nearly $70 million in PSLF revenue in fiscal year 2023. 

“We are encouraged by the work the Department has already done to hold servicers accountable, including by withholding $7.2 million in payments from MOHELA last October,” concluded the senators. “But the totality of the harms caused by MOHELA’s failures cannot be remedied solely by withholding payments that amount to a drop in the bucket of MOHELA’s total revenue. We urge ED to hold MOHELA fully accountable for its harms to borrowers and request a briefing on your efforts to do so no later than May 22, 2024.”

Along with Senators Warnock and Warren the letter was signed by U.S Senators Bernard Sanders (I-VT), Ron Wyden (D-OR), Ed Markey (D-MA), Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Laphonza Butler (D-CA), Chris Van Hollen (D-MD), and Peter Welch (D-VT).

Senator Reverend Warnock has long advocated for the White House to address the student loan crisis and has continued pushing the Administration to deliver meaningful student debt relief. Last August, the Senator pushed President Biden to swiftly fulfill his promise to deliver targeted student debt cancellation to working and middle-class families by early 2024 following the misguided SCOTUS decision overturning the President’s student debt cancellation. Prior to that, in July 2023, the Senator urged the Education Secretary to take steps to provide assistance to incarcerated individuals burdened by student loan debt. 

The letter can be found HERE and text is below:

Dear Secretary Cardona:

We write to share our concerns about the Higher Education Loan Authority of the State of Missouri’s (MOHELA) performance as a student loan servicer and to urge you to hold MOHELA accountable for its failures using the full extent of your authority.

Last week, the Department of Education (ED) announced that MOHELA borrowers will be transferred to other federal student loan servicers to “improve borrowers’ experiences.” According to public reporting, more than one million borrowers will be transferred following MOHELA’s request for a “lighter load.” This massive transfer of loans reveals the extent to which MOHELA was wholly unprepared and unable to properly support its larger portfolio, ultimately harming millions of borrowers.

This was an important action by ED to improve borrowers’ experiences moving forward. We trust that ED and MOHELA will prioritize minimizing the processing delays and errors borrowers experience during the transfer. But ED must also act to impose accountability for MOHELA’s failures that occurred prior to this transfer.

There is ample evidence of the scope of MOHELA’s problems. A new report, released on April 10, 2024, by Senators Warren, Blumenthal, Markey, and Van Hollen documented a host of failures by MOHELA during the return to repayment after the COVID-19 pause on student loan payments, interest, and collections ended. While every servicer failed to adequately prepare for the return to repayment, MOHELA made over 1.5 million more billing-related errors than all other servicers combined. MOHELA sent the wrong bills to approximately 280,000 borrowers and failed to send timely billing statements to 2.5 million borrowers, leading 800,000 borrowers to become delinquent on their loans. After making those errors, MOHELA employed a “call deflection” scheme to push borrowers away from customer service representatives, even though many of the borrowers affected by MOHELA’s errors could only get those errors corrected by contacting a customer service representative and MOHELA’s website where borrowers were deflected often had incomplete information.

MOHELA borrowers who were able to get in touch with a customer service representative endured the longest average call wait time of any servicer’s customers, reaching 38 minutes as reported by MOHELA. In fact, more than one in three MOHELA borrowers who tried to reach a customer service representative via phone abandoned their calls due to excessive wait times or other problems. Borrowers who emailed MOHELA fared no better. MOHELA borrowers waited, on average, nearly six weeks to receive a response to their emails during the return to repayment, again facing longer wait times than any other servicer’s customers.

Unsurprisingly, MOHELA received the most borrower complaints of any student loan servicer between July 2022 and December 2023. And as the sole servicer for Public Service Loan Forgiveness (PSLF) for nearly two years, MOHELA’s errors disproportionately harmed millions of teachers, nurses, service members, firefighters, and other public service workers trying to access relief to which they were legally entitled. The backlog of PSLF forms reached 1.2 million under MOHELA’s watch and did not drop below 800,000 forms for nearly half a year.

Affairs Subcommittee on Economic Policy to further investigate MOHELA’s record as a servicer. Mr. Giles refused to testify and provided no rationale for his unwillingness to do so. Nonetheless, the Subcommittee heard powerful testimony from a retired public service worker who waited a year and a half to receive PSLF relief from MOHELA and, because of MOHELA’s delays, was forced to restart her nearly $400 monthly student loan payments last October on debt that should have been canceled. The Subcommittee heard further testimony about MOHELA’s use of its quasi-state status to avoid accountability. In response to consumer protection lawsuits, MOHELA has repeatedly asserted sovereign immunity as an “arm of the state of Missouri,” essentially arguing that it cannot be held accountable in court for any of its failures despite agreeing to comply with all federal, state, and local laws in its contract with the Department of Education (ED). This ongoing effort to evade accountability is yet another reason why ED action is critical.

Subsequent developments have only affirmed the need for ED action. New information provided by MOHELA to the Subcommittee reveals that the company was paid nearly $180 million under its Direct Loan servicing contract in fiscal year 2023 and received nearly $70 million in PSLF revenue in fiscal year 2023. These payments make the company’s failures even starker – and provide ample rationale for ED to act to ensure accountability for MOHELA’s failures.

Given the sheer scope of MOHELA’s documented billing errors, poor customer service record, and other problems, alongside the company’s decision to avoid public and private accountability at every turn, ED should take further action to hold MOHELA responsible for its harms and to protect borrowers from future abuses. We are encouraged by the work the Department has already done to hold servicers accountable, including by withholding $7.2 million in payments from MOHELA last October. But the totality of the harms caused by MOHELA’s failures cannot be remedied solely by withholding payments that amount to a drop in the bucket of MOHELA’s total revenue. We urge ED to hold MOHELA fully accountable for its harms to borrowers and request a briefing on your efforts to do so no later than May 22, 2024.

Thank you for your attention to this important matter.

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