October 30, 2023 | WASHINGTON, D.C. — The U.S. Department of Education (ED) announced widespread servicing failures across the student loan system affecting millions of student loan borrowers. Included in this announcement is a plan to withhold $7.2 million in payment to the Higher Education Loan Authority of the State of Missouri (MOHELA), meant to cover loan servicing that was required under its federal contract but that the company never performed. ED will also place all affected borrowers in an interest-free forbearance—equivalent to extending the student loan payment pause—until the issue is resolved.
In response, Student Borrower Protection Center (SBPC) Executive Director Mike Pierce issued the following statement:
“Today’s revelation by the Biden Administration affirms what millions of borrowers have experienced in recent weeks: the government’s student loan contractors are not up to the task of restarting loan payments. It has long been clear that the student loan system remains profoundly broken. While more accountability is needed, ED’s action will help blunt some of the harm caused to millions of people as a result. This is excellent news.
“The failures revealed represent only some of the illegal servicing practices borrowers are facing in the return to repayment. Borrowers urgently need law enforcement officials at every level of government to act—addressing this new evidence of illegal practices by MOHELA and its peers, levying penalties where federal and state laws were broken, and ensuring that borrowers are made whole.
“MOHELA failed to perform on its contract with the federal government. Today’s announcement should mark the beginning of the end of MOHELA’s place at the center of the student loan system.”
Background
Earlier this month, borrower advocates released a series of papers warning of unjust and unlawful collection efforts by the nation’s largest student loan companies. This roadmap for legal action features a foreword by D.C. Attorney General Brian Schwalb and follows the 2020 and 2021 paper series by many of the same authors, making an urgent case to deliver wide-scale debt relief as quickly as possible. Read the full paper series here: https://protectborrowers.org/delivering-distress-report-series/
Further Reading
SBPC blog on a national servicer call-in action revealing massive servicing failures: Dropped Calls, Hours on Hold, and Unanswered Questions: Student Loan Borrower Call-In Day Shows Servicers Are Alarmingly Unprepared to Return to Repayment
SBPC blog on ED’s announcement of servicer contracts: Meet the New Servicers, Same as the Old Servicers
SBPC and National Consumer Law Center (NCLC) blog highlighting revelations of mismanagement and abuse compromising the student loan safety net: Explosive New Evidence of Mismanagement of Student Loan Program Shows Need for IDR Waiver
###
About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.