‘Accountability is needed:’ Student loan borrowers call for end to federal MOHELA contract

Long wait times and incorrect payments: Those are among the problems student loan borrowers say they’ve faced since federal student loan payments resumed last year. Borrowers say the federal student loan servicer MOHELA is to blame.

A group of student loan borrowers and Democrats in Congress gathered outside the U.S. Capitol on Wednesday calling for change. The group chanted, “fire MOHELA!”

Thomas Gokey is an organizer with the nonprofit group Debt Collective and spoke with our Washington News Bureau.

“Our members, student debtors, are constantly reaching out to us with problems with their accounts,” Gokey said. “We think some accountability is needed and that it’s time to end MOHELA’s contract entirely.”

Gokey said he was on hold for more than nine hours trying to get answers from MOHELA about his sister’s student loans.

“We had faxed time sensitive paperwork. We had emailed it to MOHELA. We uploaded it to the MOHELA website and there was no confirmation that they received it and if they didn’t receive it by the deadline, she’d be stuck with debt for decades into the future,” said Gokey. “I called and I waited on hold, and I waited until the MOHELA call center closed.”

Critics said the long delays and other errors have meant many borrowers have been wrongfully denied student debt relief or have been given incorrect repayment amounts.

“Four in ten MOHELA customers experienced a servicing failure during the student loan system’s return to repayment,” said Rep. Ayanna Pressley (D-MA). “MOHELA failed to meet its most basic obligations. Shameful.”

“This is an absolute disgrace,” said Sen. Ed Markey (D-MA). “Millions of borrowers have faced servicing errors by MOHELA and others since borrowers resumed loan payments in October of 2023.”

MOHELA is being sued by borrowers who accuse the company of repeated failures.

In a statement, a MOHELA spokesperson denied the claims and said:

“MOHELA is a governmental, non-profit entity that supports and assists around 8 million Americans with managing and navigating the complexities of their federal student loans. 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.

Ahead of return to repayment, MOHELA worked with FSA to diligently prepare to help the 6 million federal borrowers MOHELA serves who were entering repayment (of the total 8 million borrowers the organization serves of behalf of FSA), while following FSA guidance. MOHELA went to extreme lengths to increase staff in advance of return of repayment, despite there being reduced funding for servicers like MOHELA. MOHELA’s current hold times average 1-5 minutes.

In March 2024, MOHELA sent a Cease-and-Desist letter to the Student Borrower Protection Center, which can be viewed here, calling on the organization to immediately disband their disingenuous PR campaign that is irresponsibly promoting false, misleading, and sensationalized claims about MOHELA’s work as a federal contractor.”

The calls for change from borrowers come as the Biden administration announced Wednesday it canceled student debt for another 160,000 borrowers who are public service workers.

“To date, we’ve provided over $167 billion in debt relief for over 4.7 million Americans,” U.S. Education Secretary Miguel Cardona told our Washington News Bureau in a one-on-one interview.

We asked Cardona about the calls by borrowers to end the MOHELA contract.

“We’ve held servicers accountable by withholding over $9 million in payments if they didn’t do their job,” said Cardona. “We recognize that there’s a system that has to be improved and fixed and we’re taking steps to do that… We’re always looking at ways to improve services and that means when we do contract negotiations and when we’re having feedback and accountability sessions with our contractors, we’re addressing the issues that our borrowers face.”

Cardona did not say if the Biden administration is considering terminating the contract with MOHELA.

The Education Department pointed out that as of this spring, the Department transitioned to new loan servicing contracts with United Servicing and Data Solution (USDS). The Department said USDS has strengthened security, accountability, and transparency provisions.

Borrowers we spoke with said it’s long overdue for the Biden administration to eliminate its contract with MOHELA altogether.

We asked Gokey what alternatives advocates would like to see put in place instead of MOHELA.

“Broadly speaking, we think we should have fully funded public college and no student debt at all,” said Gokey. “Student loan servicers simply shouldn’t exist. But in the next couple of months, what we want to see is the Biden administration commit to transferring all of the accounts currently serviced by MOHELA to the other servicers and then canceling it as much as possible.”

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