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A quasi-governmental organization in Missouri, the Missouri Higher Education Loan Authority (MOHELA), entrusted with servicing student loans, is embroiled in legal troubles and damning criticism. The American Federation of Teachers and the Student Borrower Protection Center released a scathing 47-page report accusing MOHELA of gross mismanagement, leading to significant financial losses for borrowers.
Lawsuits and Allegations
The accusations outlined in the report claim that four in 10 of MOHELA’s borrowers have been adversely affected by “servicing failures.” These failures include a backlog of unprocessed loan-forgiveness applications, payment miscalculations, and wrongful denials. Two lawsuits filed in the United States District Court for the Eastern District of Missouri further assert that MOHELA’s failure to process decisions promptly has had a nationwide impact.
Public Service Loan Forgiveness Program Woes
A focal point of the complaints revolves around MOHELA’s handling of the Public Service Loan Forgiveness (PSLF) program. This federal initiative, aimed at forgiving student loan debt for public service workers after ten years of payments, faced challenges even before MOHELA’s involvement. The report sheds light on long-standing issues, such as a 99% denial rate in 2019, indicating broader problems within the program.
MOHELA’s Role and Controversies
Before taking on the PSLF contract, MOHELA had nearly 2.5 million borrowers. After becoming the sole PSLF servicer, its portfolio expanded significantly to almost 7.8 million borrowers. The organization, facing increased demand, cited limitations in hiring additional staff due to a fixed-rate government contract, leading to service delays. In fiscal year 2023, MOHELA earned $68.7 million in PSLF servicing fees.
Department of Education’s Response and Senate Concerns
In response to widespread issues, the U.S. Department of Education withheld $7.2 million in payment from MOHELA, highlighting failures in sending billing statements on time. Concerns raised by Democratic senators underscored difficulties faced by borrowers, including extended wait times and unresolved complaints. MOHELA reported receiving over 36,000 complaints in a year, with almost 4,000 marked as “unresolved.”
Call-Deflection Strategy and Decision-Making Scrutiny
Complaints compiled by education organizations question MOHELA’s decision-making process in PSLF application denials. The organization’s multi-stage call-deflection plan, outlined in a communications playbook, diverts callers to the website, causing additional challenges for borrowers. The report also raises concerns about the rationale behind PSLF application denials, citing minor paperwork mix-ups as reasons for rejection.
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Current Contract and Future Implications
Despite the controversies, MOHELA remains in contract with the Department of Education through the end of 2024. As borrowers anxiously await decisions on their applications, MOHELA faces mounting scrutiny over its handling of the PSLF program and servicing student loans.
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