Sen. Elizabeth Warren wants answers from MOHELA about problems student loan borrowers faced when payments resumed
Sen. Elizabeth Warren wants MOHELA (Missouri Higher Education Loan Authority) to answer for the problems student loan borrowers faced – including inaccurate bills and hourslong hold times on the phone – when the pandemic-related payment pause ended in the fall.
In a letter first shared with CNN and sent to MOHELA on Monday, the Democrat from Massachusetts asks CEO Scott Giles to testify before a Senate subcommittee on economic policy, which she chairs, on April 10. MOHELA manages more than 8 million federal student loan accounts and is one of several student loan servicers that the Department of Education contracts with to collect student loan payments from borrowers.
“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,” the letter said.
PSLF refers to the Public Service Loan Forgiveness Program, which wipes away remaining student debt after qualifying public-sector workers make 120 monthly payments. MOHELA is the only servicer that handles PSLF payments.
Student loan bills came due for more than 20 million federal student loan borrowers in October, after a more than three-year pause on payments and interest.
Bringing so many people into repayment at the same time was an unprecedented task, and industry experts expected the process to be bumpy.
Making matters even more complicated, lawmakers left funding flat for the Federal Student Aid office, which oversees the financial aid system, despite its bigger workload this year. Plus, Federal Student Aid was tasked last year with launching a new income-driven repayment plan called SAVE (Saving on a Valuable Education) and an updated version of the Free Application for Federal Student Aid, better known as the FAFSA.
Nearly 9 million borrowers – roughly 40% of the 22 million borrowers who had bills due in October – missed making their first student loan payment.
The Department of Education has already penalized MOHELA – by withholding a $7.2 million payment in October – for failing to send the first round of billing statements on time to 2.5 million borrowers. More than 800,000 people were late making their payment as a result of the mistake, according to the Department of Education.
The servicing problems weren’t isolated to MOHELA’s borrowers after the repayment pause ended. The Department of Education instructed all student loan servicers to put any borrowers impacted by a servicing mistake into an administrative forbearance during which they are not required to make payments.
Warren has warned that there could still be problems in the months ahead.
The Department of Education has created a 12-month on-ramp period meant to temporarily protect borrowers from the worst consequences of missing a payment. Borrowers who miss a federal student loan payment through September 2024 won’t be reported as delinquent or in default to the three national credit bureaus.
Warren has said that the “chaotic resumption” of payments raises questions about how effectively the on-ramp will be implemented and whether there will be unintended consequences to borrowers’ credit scores.
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