The American Federation of Teachers (AFT) filed a consumer protection lawsuit against the Higher Education Loan Authority of the State of Missouri (MOHELA).
Customer Service Quagmire
MOHELA is one of the largest student loan services companies coming under fire for mishandling loans for millions of borrowers. The central claim of the lawsuit is MOHELA knowingly and purposely sends borrowers into byzantine customer service structures. Borrowers face frequent dropped calls, long hold times, untrained staff, and online resources with inaccurate information.
Moreover, borrowers’ accounts are often inaccessible online. Billing statements are often late and miscalculated — requiring higher payments from borrowers than necessary and pushing accounts into deliquency.
“AFT has spent, and continues to spend, tens of thousands of dollars on debt clinics to educate members to better navigate the mess created by MOHELA, and it has diverted more than two thousand hours of valuable staff time that would otherwise have been spent focused on issues like collective bargaining; retirement security; healthcare; student learning conditions; and educators’, public employees’ and health care workers’ working conditions,” says in the lawsuit.
The MOHELA Papers
The ATF also alleges it spends considerable resources investigating the business practices of MOHELA and the subsequent impact on consumers. The key points of their findings are available online, named “The MOHELA Papers.”
The ATF is the second-largest labor union for teachers. Because teachers are eligible for Public Service Loan Forgiveness, members are disproportionally affected by the mishandling of PSLF applications.
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Other nonprofit advocacy groups back the ATF, including the The Student Loan Protection Center.
“The AFT alleges that MOHELA illegally overcharged borrowers on their monthly student loan bills, failed to timely process paperwork, and actively misled borrowers about their student loan accounts,” they said in a July 22 press release.
MOHELA’s Outsized Role In the Student Debt Crisis
MOHELA reportedly handles the loans of around 8 million borrowers. In 2022, MOHELA became the sole servicer for the Public Service Loan Forgiveness program.
Since 2011, MOHELA has received $1.1 billion in government funding from the Department of Education to service students loans. That includes staffing call centers to answer borrower questions, and providing access, accounting, and informational resources about paying down their student loan balance.
“MOHELA was hired by the federal government to help borrowers pay down debt, but instead it hung them out to dry to line its own pockets,” says AFT President Randi Weingarten.
MOHELA’s Response
In response, MOHELA released a statement on their contact page.
“On July 18, 2024, a federal court issued a stay preventing the Department from operating the Saving on a Valuable Education (SAVE) Plan. The Department of Education is assessing the ruling and will be in touch directly with borrowers about how this will affect them. In the meantime, you can visit StudentAid.gov/saveaction for the latest information.”
Just two weeks earlier, MOHELA issued a press release claiming a”record for processing highest amount of student loan forgiveness in public service loan forgiveness (PSLF) program history.”
MOHELA says they facilitated the cancellation of $55 billion in student debt for 737,000 borrowers.
The Student Debt Burden
As of March 2024, the average student loan debt per student is about $37,000 based on forty-five million borrowers.
The average college tuition for the 2023-2024 school year is $11,823 for in-state students and $21,802 for out-of-state students. Over four years of undergrad, that is nearly $50,000 for in-state students and nearly $90,000 for out-of-state students.
Tuition does not cover cost of living, textbooks, room and board, or any other day-to-day expense.
On average, it can take borrowers 10–20 years to pay off student loans.
Processing delays of PSLF applications results in additional payments on balances that would be forgiven after 10 years of public service. Many enter professions in public service and the nonprofit sector to alleviate the financial burden of student debt in lieu of potentially higher paid professions in the private sector.
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