MOHELA can't escape the student loan spotlight

The spotlight has shined brightly on student loan servicer Missouri Higher Education Loan Authority (MOHELA) amid fights for student debt relief and complaints about its handling of student loan payments.  

And on Wednesday, Congress puts the agency in its sights, with a Senate hearing dedicated to the allegations that have clouded MOHELA’s reputation.  

Supporters of the servicer argue it is natural the largest loan servicer has taken the most heat and pushed into the “boogeyman” role, but opponents say MOHELA has brought it on itself for poor customer service and bad practices.  

Scott Buchanan, executive director for Student Loan Servicing Alliance, who will be testifying at the hearing, told The Hill he is “cautiously optimistic” that “it’ll be an actual discussion” about the “actual data points and facts.” 

“One of the challenges here is, I think, so many organizations are feeding this false information and manipulate it, and then they tried to get political officials to sort of assume that it's true. So part of my goal with testifying is to resolve these factual issues,” Buchanan said.  

He said he wants to make clear the “root cause of the issue is not with the servicers, it’s with the program itself.”

The afternoon hearing will largely focus around the Public Service Loan Forgiveness (PSLF) program, for which MOHELA became the sole provider in 2022.  

Sen. Elizabeth Warren (D-Mass.) is the architect of the hearing. 

“Your company has contributed to student loan borrowers’ difficulties by mishandling borrowers’ return to repayment following the COVID-19 pandemic-related pause on payments, interest, and collections and by impeding public servants’ access to PSLF relief,” Warren said in a letter to the company. 

Congressional attention on MOHELA came after an investigation by Student Borrower Protection Center (SBPC) and the American Federation of Teachers (AFT), which alleged MOHELA was pushing for borrowers to use self-help options instead of talking to a representative in order to avoid giving them help for their loan troubles.  

“This is just one in a series of investigations stretching back years and the common thread across all of them is that where these private companies pledge to do right by public service workers, they often fall down on the job because the program itself is very complicated and because the business model for the industry is really not compatible with public service workers rights,” said Mike Pierce, executive director of SBPC. 

MOHELA sent a cease-and-desist to the two groups, arguing their claims have caused the company to suffer “serious damage."  

“Intentionally spreading false and misleading claims about MOHELA’s work on behalf of Federal Student Aid does nothing to improve the experience for students and borrowers,” MOHELA said. 

After what the groups’ called the “MOHELA Papers” were released, numerous Democrats, including Warren, called for an investigation to be opened against the student loan servicer.  

While Warren wanted the executive director of MOHELA to testify at the hearing, the company announced on Monday the official would not be showing up to the Senate on Wednesday.

“MOHELA has respectfully requested that the Chair temporarily suspend the April 10 hearing to provide MOHELA the opportunity to conduct its bipartisan briefings, while balancing MOHELA’s need to continue focusing on its primary mission of serving student borrowers who are at the center of all its work. After those bipartisan briefings are complete and the Subcommittee has had an opportunity to review MOHELA’s briefings and perspective, we are prepared to address the possible need for a hearing,” MOHELA said in a statement. 

Both supporters and opponents of MOHELA recognize the task the company has to undertake as the sole servicer for PSLF is massive.  

“Unfortunately, the focus of attention has always been on the larger servicers, right?” said Scott Buchanan, executive director for Student Loan Servicing Alliance. “Three years ago, it was all Navient, all the time” before the group said, “we’re not doing this anymore.”  

"There's a need to create for some sort of Frankenstein to blame for everything, when in fact, most of it is a big loan program that is really complicated and people don't like the way the law is structured,” he added. 

MOHELA did have trouble when student loans were turned back on and was fined more than $7 million by the Department of Education for sending out the wrong balances to 2.5 million borrowers. 

Pierce admits PSLF is "administratively a challenging program to be responsible for" but every task MOHELA has taken on the company "has fallen down on the job."

“They've lost borrowers’ paperwork, they failed to send bills with dependencies, calculated the payments incorrectly, they've improperly denied Public Service Workers employment, they failed to process paperwork for people pursuing Public Service Loan Forgiveness. So what you see today, compared to what you saw two years ago, is a company that has taken on growth and cannot do its job,” he added. 

Aside from its struggles with the PSLF program, MOHELA was dragged into the Supreme Court case last summer that ultimately killed universal student debt relief.  

After President Biden announced his plan in August 2022 to give at least $10,000 in loan forgiveness to every borrower, numerous groups filed lawsuits. Only two were found competent enough to go to the Supreme Court, with one case pinning its argument on the impact on MOHELA.   

Six Republican-led states argued MOHELA would lose revenue if the plan were allowed to proceed. Although MOHELA did not get directly involved in the case, its name was associated with the loss of one of Biden’s major campaign promises.  

MOHELA may see some relief soon after the Department of Education announced Friday it would be taking over some aspects of PSLF. 

“As a federal contractor for the U.S. Department of Education, Office of Federal Student Aid, MOHELA will be supporting the government on its planned transition of servicing of the PSLF Program to StudentAid.gov,” said a MOHELA spokesperson. “The decision to transition PSLF servicing to FSA was a years-long strategy first announced by the Department back in 2022, prior to MOHELA becoming the interim PSLF servicer, with FSA’s long-term goal of a transition always set to take place around this time.”