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Government punishes MOHELA for mishandling resumption of student loans

About 2.5 million borrowers did not get a timely statement from the loan servicer ahead of the resumption of federal student loan payments this month.
Government punishes MOHELA for mishandling resumption of student loans
Posted at 12:31 PM, Oct 31, 2023

Federal student loan borrowers began repaying their debt this month. Some borrowers did not get their billing statements in a timely manner, however, causing them to be delinquent, the Department of Education said. 

In response, the department announced it is withholding a $7.2 million payment to student loan servicer MOHELA for not providing student loan bills on time. The Education Department said 2.5 million borrowers did not get a billing statement in a timely manner, causing 800,000 borrowers to become delinquent. 

The Department of Education's announcement comes a week after a department spokesperson said 305,000 federal student loan borrowers received an incorrect bill for October 2023 from MOHELA. 

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The Department of Education said MOHELA inadvertently used the 2022, instead of 2023, poverty guidelines tables to calculate payments when transitioning borrowers from the REPAYE to the SAVE Plan. The Department of Education said it notified impacted borrowers that their actual payments would be different than what was billed. 

"Our top priority is to support borrowers as they return to repayment and fix the broken student loan system, and we will not tolerate errors from loan servicers that cause confusion and unwarranted financial instability for borrowers and families," said Federal Student Aid Chief Operating Officer Rich Cordray. "Through vigorous monitoring of borrower accounts, we were able to detect these mistakes and take swift action to remedy them. We are committed to making things right for borrowers and holding our contractors accountable for errors when they do occur."

In both instances, the Department of Education said it has directed MOHELA to place affected borrowers in forbearance. Any months these borrowers are in forbearance will count as credit toward loan forgiveness through Public Service Loan Forgiveness and Income Driven Repayment plans, the department said. 


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