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Lawmakers, Advocates Demand Biden and Education Department To Fire MOHELA Over Student Loan Debacle

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A group of Democratic lawmakers and advocates is urging the U.S. Department of Education to end its contract with MOHELA (Missouri Higher Education Loan Authority), citing a series of servicer failures that have negatively impacted millions of student loan borrowers.

The lawmakers argue that MOHELA's continued mismanagement of loan servicing, including inaccurate billing and poor customer service, has caused significant harm to borrowers, and it's time for the Education Department to take decisive action.

Lawmakers Demand Education Department Terminate MOHELA's Contract Over Servicer Failures

(Photo : WIKIMEDIA COMMONS / ElizabethForMA)

Growing Concerns and Legislative Push

The call to terminate MOHELA's contract comes in the wake of numerous complaints from borrowers about the company's handling of their student loans. Since the resumption of federal student loan payments in October, following a three-year pause due to the pandemic, MOHELA has been under increased scrutiny. One month after payments restarted, the Education Department withheld pay from MOHELA for failing to send on-time billing statements to over 2 million borrowers, marking the first time such a penalty was imposed on a loan servicer.

Democratic lawmakers, including Representatives Ayanna Pressley, Ilhan Omar, Greg Casar, and Senator Ed Markey, have been vocal in their criticism of MOHELA. During a recent press conference, Rep. Omar stated, "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 they are facing and it is time for us to do the right thing." This sentiment was echoed by Rep. Pressley, who emphasized that terminating MOHELA's contract would send a clear message to other loan servicers about the importance of accountability and proper management.

READ MORE: Mohela Accused Of Deliberately Delaying Customer Service Calls, Mishandling Student Loans 

Impact on Borrowers

The impact of MOHELA's failures on borrowers has been significant. Many have reported hours-long hold times to reach customer service, and some have even received notifications that loan forgiveness granted last year was reversed due to MOHELA's errors. These issues have caused frustration and financial uncertainty for borrowers who are already struggling to manage their student loan debt.

In addition to inaccurate billing and poor customer service, MOHELA has also been criticized for its handling of the Public Service Loan Forgiveness (PSLF) program. Massachusetts Senator Elizabeth Warren held a hearing in April to investigate MOHELA's management of the PSLF program. Although MOHELA's CEO Scott Giles was invited to testify before the Senate, the company declined, instead offering private briefings to address lawmakers' concerns. This move was seen by many as an attempt to avoid public accountability.

The Education Department has taken steps to address these issues by transferring over 1 million borrowers from MOHELA to new servicers. However, millions of borrowers remain under MOHELA's contract, prompting lawmakers to demand further action. "Enough is enough," said Rep. Pressley. "Terminate MOHELA's contract and put loan services on notice: we will not tolerate your negligence and exploitation; we will not let you profiteer off vulnerable student borrowers."

MOHELA's Response and the Path Forward

In response to the criticisms, a MOHELA spokesperson stated, "Borrowers are not better off when outside groups spread false and misleading information about our work as a federal contractor for FSA. We remain committed to continuing to provide the highest quality of customer service to the borrowers that we serve." Despite these assurances, the growing number of complaints from borrowers suggests that significant issues remain.

The Education Department has pledged to oversee all loan servicers more rigorously, withholding pay for those that fail to fulfill their obligations. However, Democratic lawmakers argue that more decisive action is needed, particularly in the case of MOHELA. Senator Markey captured the frustration of many borrowers and lawmakers by highlighting that MOHELA's handling of student loans has shown both incompetence and harmful intent. He emphasized that it is time to terminate MOHELA's contract due to their mismanagement, which has adversely affected young people's lives and their future planning.

As the debate over MOHELA's future continues, the focus remains on ensuring that student loan borrowers receive the support and service they deserve. Lawmakers are committed to holding servicers accountable and advocating for policies that protect borrowers from negligence and exploitation. The Education Department's decision on MOHELA's contract will be a critical step in this ongoing effort to improve the student loan servicing system and provide relief to millions of borrowers across the country.

RELATED ARTICLE: Student Loan-Servicing Operations, 900 Employees To Be Outsourced To Mohela By Navient Unit 

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