MOHELA’s handling of public service loan forgiveness is facing criticism

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The Missouri Higher Education Loan Authority, a quasi-state entity that manages student loans and grants for the Education Department, is facing a backlash from borrowers and lawmakers over its handling of a debt forgiveness program for public servants.

Thousands of borrowers have lodged complaints with the Education Department against the student loan servicer, commonly known as MOHELA, in the past three months, according to two people familiar with the matter who spoke on the condition of anonymity because they were not authorized to speak publicly. They did not provide details of the complaints. During the same period, the Consumer Financial Protection Bureau also received more than 500 complaints about the company’s loan servicing, with borrowers reporting incorrect payment counts and trouble getting a hold of customer service. By comparison, the CFPB received seven complaints against MOHELA in the final quarter of 2021.

MOHELA services the federal student loans of more than 7 million people, a number of whom are working toward public service loan forgiveness.

MOHELA did not immediately respond to requests for comment, but it has previously said it was inundated with applications and was trying to resolve lag times. The Education Department declined to discuss the complaints but said it is monitoring the situation and working with MOHELA to add more staff.

It may take longer for some public servants to see student loan relief

The spike in complaints against the loan servicer corresponds with the wind-down of a limited expansion of the Public Service Loan Forgiveness program, which MOHELA manages. In October 2021, the Biden administration kicked off a one-year waiver that allowed social workers, teachers and other public servants to retroactively receive credit toward debt cancellation regardless of their type of federal loan or payment plan.

Congressional Democrats have fought to fix the long-troubled forgiveness program, which cancels the outstanding balance of public servants after 10 years of service and 120 on-time student loan payments. Lawmakers and participants have derided the program, created in 2007, as exceedingly complex and poorly run. Those criticisms have heightened scrutiny of the waiver.

While the Education Department said some 360,000 people have benefited from the reprieve, the hundreds of thousands still awaiting help are drawing attention on Capitol Hill.

At a Senate Banking Committee hearing earlier this month, Sen. Robert Menendez (D-N.J.) urged CFPB Director Rohit Chopra to investigate MOHELA as his constituents complain about poor customer service.

“Complaints range from telephone wait times of up to four hours, six-month or longer processing delays for PSLF applications and employee certification forms,” Menendez said. “I cannot overstate the negative economic impacts caused by MOHELA’s abysmal servicing for public service employees.”

While Chopra declined to comment on the bureau’s supervision of the student loan servicer, he told Menendez that the CFPB is well aware of the litany of grievances over MOHELA’s handling of the forgiveness program.

“Any servicer that is supposed to administer the student loan benefits that are afforded under the law and embedded in the contract must adhere to that,” Chopra testified. “We will not hesitate where we find law violations to [take action].”

Until recently, MOHELA avoided the ire of liberal lawmakers and advocates who have been critical of the student loan servicing industry. The company was not subject to investigations and lawsuits that thrust larger student loan companies such as Navient and FedLoan Servicing into an uncomfortable spotlight.

MOHELA raised its profile by becoming the sole servicer for PSLF in July after FedLoan, an arm of the Pennsylvania Higher Education Assistance Agency, cut ties with the Education Department.

Months later, MOHELA also found itself in the middle of a lawsuit brought by six Republican-led states challenging President Biden’s plan to cancel up to $20,000 in federal student loans. While MOHELA is not a party to the lawsuit, Missouri Attorney General Eric Schmitt (R) said the company would lose revenue that it uses to fund state scholarships.

MOHELA has spent years burnishing its reputation as a thorough student loan servicer. But some borrowers say they were stunned after receiving notices this fall saying they had few payments that qualified for the forgiveness program.

After more than a decade of teaching, Brianna Gable, 34, was certain she had satisfied the criteria for the program. Her loans were made directly by the federal government and paid back through an income-driven plan — requirements that along with her on-time payments should have created a clear path to debt relief.

Yet in a notice from MOHELA in October, the servicer said she had only 14 qualifying payments.

“I panicked,” said Gable, who teaches fourth grade in Colorado. “I was like, there’s no way that’s right. I was in my 11th year of teaching for public schools. I thought that they were trying to screw me over.”

Months before that notice, Gable had applied and was approved for loan forgiveness by MOHELA’s predecessor FedLoan, which told her the final payment count would be left in MOHELA’s hands. She said she figured something got lost in the transition.

When Gable called her servicer, she said it took about 30 minutes to get someone on the line. She said the representative assured her that MOHELA was still processing payments and that the account might not reflect accurate information.

“If that’s the case, why send me a letter telling me my application has been denied?” Gable asked. “It just seemed like nobody really knew what was going on or when it would be fixed. I checked a few weeks later, and nothing had changed.”

As previously reported by The Washington Post, MOHELA said applications under the PSLF waiver far exceeded expectations, with more than 2 million forms submitted to the company between July and November. The influx of submissions was coupled with a surge in related mail, email and faxes, the servicer said this past month.

At the time, MOHELA said it was also contending with delays in receiving files from the Education Department and other servicers that are needed to update payment counts and complete loan discharges.

The company said interest in Biden’s student loan forgiveness program and the waiver resulted in a surge in calls and average wait times of 2 hours that had since decreased. MOHELA said it was staffing up, adding almost 100 new employees per week back in November. It was also offering overtime hours, work-schedule adjustments and extra pay for employment referrals to reduce wait times.

Some borrowers who spoke with The Post about erroneous payment counts say they are still awaiting updates. But others have received good news.

This week, Gable checked her account again and discovered it had been updated to show 131 eligible payments. She still has to submit W2 forms to verify previous employment in Arizona and Colorado Springs, but after that, Gable will be free of $30,000 in student debt.

“This could have been handled better,” Gable said. “I wish [MOHELA] would have just said we are still processing payments at this time. Check back at a later date. Why cause this confusion?”