Change Impacts Mohela Borrowers
The U.S. Department of Education recently announced that it will soon transfer some student loan borrowers from Mohela, or the Missouri Higher Education Loan Authority, to different servicers.
What You Need to Know
Over 1 million borrowers may be impacted by the change. The Education Department contracts with different companies to service its federal student loans, including Mohela, Nelnet, and EdFinancial. The department pays these servicers more than $1 billion a year to manage the loans.
Why the Transfer is Happening
Mohela requested the transfers, but the company has also been the subject of controversy in recent months. In October 2023, the government accused Mohela of failing to send timely billing statements to 2.5 million borrowers, resulting in more than 800,000 borrowers becoming delinquent. The Education Department withheld $7.2 million in payment to Mohela for its error.
Background on Mohela
Mohela has been a magnet for controversy of late. In February, the Student Borrower Protection Center and the American Federation of Teachers published a joint report finding that four in 10 student loan borrowers in repayment serviced by Mohela "experienced a servicing failure since loan payments resumed in September 2023." On April 10, the U.S. Senate Committee on Banking, Housing and Urban Affairs Subcommittee on Economic Policy held a hearing about Mohela’s performance as a student loan servicer.
What Borrowers Should Do Amid Transition
Borrowers who are being transferred to a different servicer should receive alerts from Mohela and their new servicer. They will then need to establish an online account with their new servicer. If a borrower has a problem with their servicer, they can submit a complaint to the Department of Education’s Federal Student Aid unit.
Conclusion
The transfer of borrowers from Mohela to different servicers is a significant change that may impact over 1 million borrowers. Borrowers should be aware of the change and take steps to establish an online account with their new servicer and reenroll in automatic payments if necessary.
Frequently Asked Questions
Q: Who is being transferred to a different servicer?
A: Over 1 million borrowers currently serviced by Mohela are being transferred to a different servicer.
Q: Why is Mohela being transferred to a different servicer?
A: Mohela requested the transfers, but the company has also been the subject of controversy in recent months.
Q: What should borrowers do amid the transition?
A: Borrowers should receive alerts from Mohela and their new servicer, and establish an online account with their new servicer. If a borrower has a problem with their servicer, they can submit a complaint to the Department of Education’s Federal Student Aid unit.
Q: Will Mohela still service federal student loans?
A: Yes, Mohela will still service the federal student loans of at least 6 million borrowers after the transfers.
