Title: U.S. Department of Education Penalizes Mohela for Failure to Send Timely Billing Statements
Byline: Pierre Herubel
The U.S. Department of Education has taken action against student loan servicer Mohela, also known as the Missouri Higher Education Loan Authority, for its failure to send timely billing statements to 2.5 million borrowers. This oversight has resulted in more than 800,000 borrowers becoming delinquent on their loans, according to a statement released by the Education Department on Monday.
In response to Mohela’s errors, the department is withholding $7.2 million in payment to the servicer for the month of October. Additionally, the Education Department has instructed Mohela to place all affected borrowers in forbearance until the issue is fully resolved.
Rich Cordray, the chief operating officer of federal student aid, emphasized that supporting borrowers and fixing the broken student loan system is the department’s top priority. Cordray stated, “We will not tolerate errors from loan servicers that cause confusion and unwarranted financial instability for borrowers and families.”
This move by the government to withhold payment from a student loan servicer is believed to be one of the first of its kind, according to higher education expert Mark Kantrowitz. Kantrowitz remarked on the fairness of holding loan servicers accountable for mailing late statements, stating that borrowers are penalized for making late payments.
Mohela has not yet responded to requests for comment on the matter.
In related news, federal student loan payments, which have been on pause since March 2020, resumed this month. The Education Department contracts with various companies, including Mohela, Nelnet, and EdFinancial, to service its federal student loans. These servicers receive a total of more than $1 billion each year from the government for their services, according to Kantrowitz.
Back in September, Senator Elizabeth Warren and other lawmakers expressed concerns about the servicers’ preparedness for the return to loan repayment in a letter to the student loan servicers. Mohela, among others, acknowledged anticipated wait times and servicing delays during the transition.
Critics of the servicers argue that they had ample time to prepare for the transition and point to previous mishandling of borrowers’ accounts. Braxton Brewington, the press secretary for the Debt Collective, a debt cancellation advocacy organization, questioned why the Biden administration continues to contract with Mohela and other servicers with a track record of financial incentives leading to misconduct.
This is a breaking news story. Updates will be provided as they become available.
I have over 10 years of experience in the cryptocurrency industry and I have been on the list of the top authors on LinkedIn for the past 5 years. I have a wealth of knowledge to share with my readers, and my goal is to help them navigate the ever-changing world of cryptocurrencies.
