Accusations of Call Deflection and Mismanagement Leveled Against Major Student Loan Company MOHELA

Two prominent educational organizations, the American Federation of Teachers and the Student Borrower Protection Center, are intensifying their scrutiny of a major student loan company.

The allegations against the company include mismanagement of a critical student loan program for public servants and an alleged “call deflection scheme” aimed at avoiding borrowers seeking assistance.

Obtained through public information laws, a collection of internal documents from the Missouri Higher Education Loan Authority (MOHELA) was recently disclosed by these groups. MOHELA, a student loan servicer operating nationwide, is at the center of the controversy.

According to Mike Pierce, the executive director of the Student Borrower Protection Center, “something rotten is happening in Missouri,” alluding to the evidence they have amassed.

The company strongly refutes the accusations, deeming them false and “nothing more than a PR campaign.” In a statement to USA TODAY, a MOHELA spokesperson described the allegations as misleading and reaffirmed the company’s commitment to assisting the millions of student loan borrowers it serves.

The ongoing dispute highlights the strained relationship between student loan companies and key Democratic constituencies, who are pushing for reforms in the student loan system. Meanwhile, the Biden administration is entrusting entities like MOHELA to implement significant debt relief initiatives during an election year where student loan forgiveness is a prominent issue.

A 47-page report released this week sheds light on how MOHELA managed the transition for student loan payments this fall.

Addressing the challenges of reinstating the student loan system post-pandemic, the report reveals that a substantial portion of borrowers failed to make their initial payments.

The report accuses MOHELA of confusing borrowers with misinformation and false promises to hinder problem resolution, potentially saving the company money in the process.

The Education Department stated that the Biden administration is committed to protecting borrowers from the actions of student loan companies. MOHELA was recently penalized $7.2 million for failing to send timely bills to millions of borrowers when payments resumed.

What are the accusations?

The advocacy groups highlight two major grievances against MOHELA.

First, the allegations center on the Public Service Loan Forgiveness (PSLF) program, which offers loan cancellation to borrowers in public service roles after a decade of responsible payments. MOHELA handles student loans for PSLF participants.

According to the report, MOHELA allowed a backlog of nearly one million unprocessed PSLF applications to amass, providing incorrect information to some borrowers and miscounting payments needed for full relief.

Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren criticized MOHELA’s conduct in a joint statement this week, condemning the treatment of public service-oriented borrowers.

MOHELA attested to granting $43.8 billion in PSLF loan forgiveness to over 606,000 borrowers as of January this year but emphasized the necessity of federal authorization for relief processing.

Dismissing claims of profiting from stalled applications, MOHELA defended its practices through Scott Buchanan, the executive director of the Student Loan Servicing Alliance.

‘Deflecting’ calls?

The report also accuses MOHELA of implementing a “call deflection scheme” to steer borrowers away from customer service representatives.

The company’s alleged strategy to divert calls was outlined in an internal plan developed last July for managing customer inquiries during the repayment period.

Characterizing the situation as driven by greed, Randi Weingarten, president of the American Federation of Teachers, criticized MOHELA’s approach.

Contrary to the allegations, MOHELA asserted that their pre-repayment strategy, aligning with the Education Department’s guidelines, aimed to assist borrowers in handling issues independently online rather than relying solely on phone support.

Congressional Democrats urged the Consumer Financial Protection Bureau to investigate the report’s claims, seeking further scrutiny of MOHELA’s practices.

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