WASHINGTON — A group of advocates and progressive Democratic lawmakers called on the U.S. Department of Education on Wednesday to end its contract with MOHELA, a Missouri-based student loan servicer.
U.S. Reps. Ilhan Omar of Minnesota, Ayanna Pressley of Massachusetts, Greg Casar of Texas and U.S. Sen. Ed Markey of Massachusetts urged the department to cut ties with MOHELA, also known as the Higher Education Loan Authority of the State of Missouri, during a press conference hosted by the Debt Collective, which advocates for canceling student debt.
Advocates and the lawmakers accused MOHELA of being a predatory loan service and failing student borrowers, citing mismanagement, administrative failures and hours-long wait times for assistance.
“It is time to stop their contract, it is time to fire them, it is time to listen to the borrowers that have been speaking up about the struggles that they are facing, and it is time for us to do the right thing,” Omar said. “We are asking the administration to take this step forward because it is past time that we listen to the borrowers that have been suffering under the incompetence of MOHELA.”
The Education Department did not respond on the record to a request for comment Wednesday.
In moves it has characterized as bolstering protections for borrowers, the department launched a new accountability initiative in November and has transitioned to new loan servicing contracts.
‘Nothing short of a nightmare’
MOHELA is at the center of two class-action lawsuits in recent months accusing the nonprofit of a “failure to timely process and render decisions for student loan borrowers enrolled in the Public Service Loan Forgiveness program.”
The student loan servicer has also taken heat from the Student Borrower Protection Center, an advocacy group, and the American Federation of Teachers, a major teachers’ union. In a report from February, the two entities accused the nonprofit of failing “to perform basic servicing functions.”
They also claimed that “more than four in ten student loan borrowers MOHELA services have experienced a servicing failure since loan payments resumed in September 2023.”
In March, MOHELA sent a cease and desist letter to the Student Borrower Protection Center, accusing its report of making “false, misleading and sensationalized claims and insinuations regarding MOHELA and its business activities.”
A spokesperson for MOHELA said in an emailed statement Wednesday that “borrowers are not better off when outside groups spread false and misleading information about our work as a federal contractor for FSA.” The spokesperson added that MOHELA remains “committed to continuing to provide the highest quality of customer service to the borrowers that we serve.”
Student loan servicers are companies contracted by the federal government to handle billing and other administrative tasks regarding federal student loans, according to Federal Student Aid.
MOHELA services nearly 8 million borrowers after winning a contract in 2022 to handle the Education Department’s Public Service Loan Forgiveness program.
Mike Pierce, executive director of the Student Borrower Protection Center, said during Wednesday’s event that “at every step,” MOHELA has “failed student loan borrowers.”
“They’ve lost paperwork, they’ve given people the runaround,” Pierce said while standing next to an exhibit displaying what appeared to be a nine-hour hold time when trying to reach one of MOHELA’s customer service representatives.
Randi Weingarten, president of the American Federation of Teachers, at Wednesday’s press conference said MOHELA has a “call-deflection scheme.”
“When it is critical for people to be on the phone with someone, they can’t get on the phone with someone,” Weingarten said.
Shamell Bell, a member of the Debt Collective, said her interactions with the student loan servicer have been “nothing short of a nightmare.”
Bell said she was in a “labyrinth of just false information, false promises and failures that are not just administrative errors” but also “systemic obstacles that jeopardize the financial stability and mental wellness of countless borrowers like myself.”
More student loan forgiveness
Meanwhile, the Biden administration said earlier Wednesday that it had approved an additional $7.7 billion in student debt relief for 160,500 borrowers. The bulk of the relief — more than $5 billion — went to nearly 67,000 borrowers partaking in the Public Service Loan Forgiveness program.
Wednesday’s move brought the administration’s total loan forgiveness to $167 billion for 4.75 million Americans.
“The Biden-Harris Administration remains persistent about our efforts to bring student debt relief to millions more across the country, and this announcement proves it,” U.S. Education Secretary Miguel Cardona said in a statement. “One out of every 10 federal student loan borrowers approved for debt relief means one out of every 10 borrowers now has financial breathing room and a burden lifted.”
