MOHELA Senate Hearing: What Student Loan Borrowers Should Know

A group of Democratic U.S. senators recently questioned student loan experts and stakeholders about the performance of MOHELA, a student loan servicer that has been in the spotlight for allegations that it mismanaged the Public Service Loan Forgiveness (PSLF) program and provided poor customer service to student loan borrowers.

On April 10, Massachusetts Sen. Elizabeth Warren, chair of the Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Economic Policy, called the hearing. She was joined by Sens. Bob Menendez, D-N.J., Chris Van Hollen, D-Md., John Fetterman, D-Pa., and Raphael Warnock, D-Ga.

In the audience, a group of borrower activists representing organizations including the Student Debt Crisis Center and the Debt Collective wore red T-shirts that read “FIRE MOHELA.”

The witnesses who testified before the subcommittee were:

  • Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center (SBPC), a borrower advocacy organization. 

  • Quinton Lucas, mayor of Kansas City, Missouri.

  • Jason Delisle, nonresident senior fellow, Urban Institute’s Center on Education Data and Policy, a nonpartisan think tank. 

  • Scott Buchanan, executive director of the Student Loan Servicing Alliance, the trade association for federal and private student loan servicers. 

  • Kathleen White, former faculty member, City College of San Francisco. 

Here’s what happened at the hearing, how we got here and what it could mean for you and your student debt.

What happened at the MOHELA Senate hearing

During the hearing, the witnesses each offered their perspective on MOHELA’s performance as a servicer. White, who spent about 40 years making over $305,000 in student loan payments for herself and her kids before getting forgiveness under PSLF, detailed her frustration with the servicer. Her forgiveness was initially denied in 2017; White said she finally got almost $30,000 of student debt erased in February after calling or emailing MOHELA 30 times and filing seven complaints.

“Staff were in training, without ability to accelerate complicated cases or address questions that deviated from standard general topics,” White said. “All the employees were polite, and they were helpful, but it seemed like they did not have the tools to escalate to a supervisor or to answer questions like mine.”

Buchanan defended MOHELA throughout the hearing. He said rapidly changing Education Department guidance, an increasingly complicated student loan program and limited funding from Congress made it difficult for MOHELA to adequately serve borrowers.

The senators asked Yu more questions than any other witness. Yu maintained that MOHELA’s actions directly harmed borrowers, especially public service workers whose loans are serviced by the company. She encouraged the senators to hold MOHELA responsible for the harm it may have caused borrowers and end the servicing contract with the company.

MOHELA’s CEO Scott Giles declined his invitation to attend the hearing as a witness, instead offering to hold a series of private briefings for the subcommittee. Warren repeatedly called out Giles’ absence.

How we got here

Based in Missouri, MOHELA has serviced federal student loans since 2011. It manages the accounts of 8.4 million people, or roughly one-fifth of all federal student loan borrowers. Currently, it’s the only servicer that manages loans for PSLF-eligible borrowers like police officers and teachers.

After student loan bills resumed in October, following the three-year pandemic payment pause, the Education Department found that MOHELA failed to send timely billing statements to 2.5 million borrowers, causing 800,000 borrowers to miss a payment. Borrowers affected by these errors were placed into an administrative forbearance until MOHELA resolved them. The Education Department withheld $7.2 million in pay from MOHELA for the mistake. The other three key servicers — Aidvantage, EdFinancial and Nelnet — faced smaller fines for mistakes made during the return to repayment.

MOHELA was the subject of a recent investigation by the SBPC and the American Federation of Teachers. The report alleged that the servicer engaged in a “call deflection scheme” in which agents directed borrowers to dead-end parts of MOHELA’s website, instead of giving them sufficient help over the phone. It also alleged that MOHELA mismanaged the PSLF program and incorrectly denied forgiveness applications.

“Some suggest that the servicer developed and implemented a strategy called ‘call deflection’ and suggest they did so to harm borrowers. That is false. In fact, [the Federal Student Aid office] mandated all servicers utilize this strategy and included it in their own playbook to servicers,” Buchanan said at the hearing. “Recent accusations suggesting servicers are responsible for a large backlog of Public Service Loan Forgiveness applications, and that the backlog is intentional, are also false. Today, FSA makes all decisions about whether to approve or deny forgiveness, and so the vast majority of the backlog resides at a resource-constrained FSA.”

What it means for your money

This Senate hearing won’t immediately impact your student loans if MOHELA is your servicer, but it indicates that lawmakers are ramping up scrutiny of federal student loan servicers.

“At this point, we don’t know what’s going to come out of this hearing, but we do know that people are paying attention and people are identifying the fact that something needs to be done,” says Nika Booth, a debt expert and personal finance content creator who attended the Senate hearing. “So if you are a MOHELA borrower, keep making your payments, make sure you stay up to date, listen to the guidance that comes out of the Department of Education, and hopefully you’ll see some relief soon.”

If MOHELA’s customer service department gives you poor guidance, puts you on hold for hours or bills you the wrong amount, consider filing a student loan complaint. You can complain to the FSA office, the Consumer Financial Protection Bureau and state ombudsman offices. Complaints can alert regulators and lawmakers to widespread servicer issues.

If you’re struggling to afford your student loan payments, consider enrolling in an income-driven repayment (IDR) plan. The new IDR plan, SAVE, can cut your monthly bills in half. If you earn under $32,800 per year as an individual or $67,500 as a family of four, you could get $0 bills, while making progress toward IDR or PSLF forgiveness.