Student Loan Servicer MOHELA Is in Trouble Again

The Biden Administration placed new pressure on the Missouri Higher Education Loan Authority (MOHELA) for its recent handling of federal student loans. According to the Washington Post, the Department of Education (DOE) temporarily halted assigning new borrower accounts to MOHELA, citing significant mismanagement, including failing to process over 460,000 applications for income-driven repayment plans. The administration has demanded a corrective plan from MOHELA within 10 business days, and further action (including the potential loss of its federal contract), could follow if improvements aren’t made. 

MOHELA has faced backlash from borrowers, advocacy groups, and politicians. This has led to calls for its removal as a federal loan servicer. Issues include delays in implementing the SAVE plan, processing errors, and a backlog in applications. The department criticized MOHELA for these errors, which could hinder borrowers’ progress toward loan forgiveness. 

In response, MOHELA expressed surprise, citing that the Federal Student Aid office had awarded them a substantial portion of new accounts just 20 days prior. MOHELA argues the administration’s directives have stretched its resources thin. Some conservative lawmakers support this view, suggesting that the DOE used servicers as a scapegoat for broader challenges. 

Our perspective on this issue is twofold:  

• MOHELA’s mistakes (and possible misdeeds) are well documented. Any action DOE decides to take, including revoking their contract, would be justified.   

• Given the significance of loan forgiveness to the Biden administration, it’s also reasonable to consider that political motivations could be influencing the actions against MOHELA. Republicans have effectively used the company as a pawn to block certain forgiveness efforts. If Mohela were removed from the picture, plaintiff’s may lose standing and clear the way for Biden’s student loan agenda to move forward.  

This situation reflects the broader tension in the student loan arena, with both accountability for servicers and the political implications of forgiveness policies playing key roles. As the debate continues, we will monitor how these developments impact borrowers. And if you have any questions about how this directly impacts you, please don’t hesitate to contact us.