Warren Leads Growing Coalition of Senators Urging Dept. of Education to Hold Student Loan Servicer MOHELA Accountable for Its Failures

May 09, 2024

Warren Leads Growing Coalition of Senators Urging Dept. of Education to Hold Student Loan Servicer MOHELA Accountable for Its Failures

Text of Letter (PDF)

Washington D.C. - Senator Elizabeth Warren (D-Mass.) led a growing coalition of Senators in a letter to the Department of Education (ED) urging the agency to hold student loan servicer MOHELA accountable for its failures. The letter was signed by Senate HELP Committee Chair Bernard Sanders (I-VT), Senate Finance Committee Chair Ron Wyden (D-Ore), and Senators Ed Markey (D-Mass.), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Laphonza Butler (D-Calif.), Chris Van Hollen (D-Md.), Raphael Warnock (D-Ga.), and Peter Welch (D-Vt.).

The letter comes one week after ED announced that more than a million MOHELA borrowers will be transferred to other federal student loan servicers to "improve borrowers' experiences."

"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.

When Senator Warren announced she would lead a hearing of 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 PSLF 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."

Senator Warren has led the fight to reform our higher education system, cancel student loan debt, and hold student loan servicers accountable:

• On May 7, 2024, Senator Warren and 24 members of the U.S. Senate sent a letter to Senator Tammy Baldwin, Chair of the Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, and Senator Shelley Moore Capito, Ranking Member of the Subcommittee, encouraging them to provide $2.7 billion in funding to the Office of Federal Student Aid (FSA) in fiscal year (FY) 2025.
• On May 1, 2024, Senators Warren, Carper, Kaine, and Representative Don Davis (D-N.C.) called on the Department of Defense (DoD) to release data on the Postsecondary Education Complaint System (PECS), a centralized database to track complaints against schools who participate in the Tuition Assistance (TA) and My Career Advancement Account Scholarship (MyCAA) program.
• In April 2024, Senator Warren led eight of her colleagues in sending a letter to David L. Yowan, President and Chief Executive Officer of student loan servicer Navient, urging the servicer to cancel decades-old private student loans pushed onto borrowers attending fraudulent, for-profit colleges.
• In April 2024, Senators Warren, Blumenthal, Markey, and Van Hollen released a new report: Servicing Scandals: Student Loan Servicers' Failures During Return to Repayment, which reveals a decades-long pattern of student loan servicer incompetence and misconduct that has affected millions of borrowers nationwide.
• In April 2024, Senator Elizabeth Warren led a hearing on student loan servicer Higher Education Loan Authority of the State of Missouri (MOHELA) and its failures during borrowers' return to repayment, including MOHELA's mismanagement of the Public Service Loan Forgiveness program.
• In March 2024, Senators Elizabeth Warren and Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, along with U.S. Representatives Ayanna Pressley (D-Mass.), Pramila Jayapal (D-Wash.), Raúl Grijalva (D-Ariz.), and John Larson (D-Conn.), led their colleagues in calling on the Social Security Administration (SSA), the U.S. Department of the Treasury (Treasury), and the U.S. Department of Education to end the practice of offsetting Social Security benefits to pay off defaulted student loans.
• In February 2024, Senator Warren, Majority Leader Chuck Schumer (D-N.Y.), and Senator Bernie Sanders (I-Vt.) released a statement calling for an investigation into student loan mismanagement by MOHELA.
• In January 2024, Senators Warren, Schumer, Sanders, Senator Raphael Warnock (D-Ga.), and Senator Alex Padilla (D-Calif.), along with Representative Ayanna Pressley, Assistant Democratic Leader Jim Clyburn (D-S.C.), Representative Frederica Wilson (D-Fla.), and Representative Ilhan Omar (D-Minn.), led their colleagues in calling on the Secretary of Education Miguel Cardona to host a fourth session of the student debt negotiated rulemaking to consider relief for borrowers experiencing financial hardship.
• In December 2023, U.S. Senators Warren, Richard Blumenthal, Ed Markey,, and Chris Van Hollen (D-Md.) sent follow-up letters to student loan servicers - MOHELA, EdFinancial, Nelnet, and Maximus - raising concerns about borrowers' problems with return to repayment, requesting information about the borrower experience, and pushing back on the servicers' claim that budget shortfalls limit their ability provide quality customer service to millions of borrowers.
• In December 2023, Senators Warren, Schumer, Sanders, Alex Padilla (D-CA), and Representatives Ayanna Pressley (D-Mass.), Ilhan Omar (D-Minn.), and Frederica Wilson (D-Fla.) sent a letter to U.S. Secretary of Education Miguel Cardona, urging him to leverage his existing and full authority under the Higher Education Act to provide expanded student debt relief to working and middle-class borrowers.
• In August 2023, Senator Warren, Congresswoman Ayanna Pressley, Senate Majority Leader Chuck Schumer (D-N.Y.), Senators Alex Padilla and Raphael Warnock (D-Ga.) and U.S. Representatives Ilhan Omar, Jim Clyburn, and Frederica Wilson led 79 other lawmakers in a letter to President Joe Biden, urging him to swiftly deliver on his promise to deliver student debt cancellation to working and middle class families by early 2024.
• In October 2022, Senator Warren and Representative Ayanna Pressley (D-Mass.) visited communities across Massachusetts to celebrate the Biden administration's student debt cancellation plan and help residents sign up for student loan relief.
• In October 2022, Senator Warren called on the Department of Education to hold for-profit colleges executives accountable for scamming students out of a quality education and loading them up with student debt.
• Senator Warren, along with Senate Democratic Whip Dick Durbin (D-Ill.), Senator Brown and Representatives Pramila Jayapal (D-Wash.) and Mark Takano (D-Calif.), urged Secretary of Education Miguel Cardona to swiftly discharge the loans of borrowers defrauded by predatory for-profit colleges and universities, including those operated by Corinthian College.
• Senator Warren, along with Senate Majority Leader Charles E. Schumer (D-N.Y.) and Representatives Jayapal, Pressley, Ilhan Omar (D-Minn.), and Katie Porter (D-Calif.) led more than 80 colleagues in a bicameral letter to the Department of Education calling for it to release the memo outlining the Biden administration's legal authority to cancel federal student loan debt and immediately cancel up to $50,000 of debt for Federal student loan borrowers.
• Senator Warren, along with Senator Markey and Representative Pressley, released a report that detailed the ongoing failures of the Public Service Loan Forgiveness program for public servants in Massachusetts.
• In April 2021, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.

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