May 14, 2024

Merkley, Wyden Join Senate Colleagues In Urging Dept. of Education to Hold Student Loan Servicer MOHELA Accountable for Its Failures

WASHINGTON, D.C. – Oregon’s U.S. Senators Jeff Merkley and Ron Wyden joined a coalition of Senators led by Senator Elizabeth Warren (D-MA) in a letter to the U.S. Department of Education (ED) urging the agency to hold student loan servicer MOHELA accountable for its failures.  

?The letter comes after ED announced that more than a million MOHELA borrowers will be transferred to other federal student loan servicers to “improve borrowers’ experiences.” Joining Warren, Merkley, and Wyden in sending the letter were Senators Bernie Sanders (I-VT), Ed Markey (D-MA), Richard Blumenthal (D-CT), Laphonza Butler (D-CA), Chris Van Hollen (D-MD), Raphael Warnock (D-GA), and Peter Welch (D-VT). 

“We trust that ED and MOHELA will prioritize minimizing the processing delays and errors borrowers experience during the transfer,” wrote the senators. “But ED must also act to impose accountability for MOHELA’s failures that occurred prior to this transfer.” 

MOHELA’s failures were documented in a new report, released on April 10, 2024, by Senators Warren, Blumenthal, Markey, and Van Hollen. Most notably, MOHELA made over 1.5 million more billing-related errors than all other servicers combined. The servicer sent the wrong bills to approximately 280,000 borrowers and failed to send timely billing statements to 2.5 million borrowers, leading 800,000 borrowers to become delinquent on their loans. Then, MOHELA employed a “call deflection” scheme to push borrowers away from getting the help they needed.  

“Given the sheer scope of MOHELA’s documented billing errors, poor customer service record, and other problems, alongside the company’s decision to avoid public and private accountability at every turn, ED should take further action to hold MOHELA responsible for its harms and to protect borrowers from future abuses,” wrote the senators. 

In a hearing for the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy to review MOHELA’s record as a servicer, MOHELA’s CEO, Scott Giles, refused to testify and provided no rationale for his unwillingness to do so. Nonetheless, the Subcommittee heard powerful testimony about the delays that public service workers have faced in getting student debt relief from MOHELA and the servicer’s use of its quasi-state status to avoid accountability in court. 

Additionally, new information provided by MOHELA to the Subcommittee only reinforces the need for ED to act. The company was paid nearly $180 million under its Direct Loan servicing contract in fiscal year 2023 and received nearly $70 million in Public Service Loan Forgiveness (PSLF) program revenue in fiscal year 2023.?  

“We are encouraged by the work the Department has already done to hold servicers accountable, including by withholding $7.2 million in payments from MOHELA last October,” concluded the senators. “But the totality of the harms caused by MOHELA’s failures cannot be remedied solely by withholding payments that amount to a drop in the bucket of MOHELA’s total revenue. We urge ED to hold MOHELA fully accountable for its harms to borrowers and request a briefing on your efforts to do so no later than May 22, 2024.” 

Text of the letter can be found here.