The U.S. Department of Education sign hangs at the entrance to the federal building housing the agency’s headquarters, February 9, 2024, in Washington, DC.
J.David Ake | Getty Images
If your current federal student loan servicer is Mohela, or the Missouri Higher Education Loan Authority, the U.S. Department of Education said it will soon shift some student loan borrowers to different servicers.
Here’s what you need to know about the change.
The change impacts Mohela borrowers
The Education Ministry began moving some of Mohela’s borrowers to different companies this week, it said in an April 29 blog post.
More than a million borrowers could be affected.
“Another servicer will begin servicing these loans and assisting these borrowers,” the department said.
The Department of Education contracts with various companies to service its federal student loans, including Mohela, Nelnet and EdFinancial. It does this by paying providers more than $1 billion a year, according to higher education expert Mark Kantrowitz.
Why the transfer takes place
Mohela requested these transfers, the Education Ministry said, but the company has also been a magnet for controversy in recent times.
In late October 2023, the government accused the service of failing to send timely billing statements to 2.5 million borrowers when the Covid-era payment pause expired, leading to delinquency of more than 800,000 borrowers.
The Department of Education withheld $7.2 million in payment to Mohela for his mistake.
“The service disruption at Mohela last fall may have been caused by capacity issues,” Kantrowitz said.
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In February, the Student Borrower Protection Center and the American Federation of Teachers released a joint report titled “The Mohela Papers,” revealing that four out of 10 student loan borrowers in repayment insured by Mohela “have experienced a service failure since recovery loan repayments in September. 2023.”
On April 10, the Economic Policy Subcommittee of the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing on Mohela’s performance as a student loan servicer.
“Today, Mohela gave up more than 10 percent of its total loan servicing business, demonstrating that its leaders now recognize what borrowers have long understood: Mohela’s position as a leader in the loan servicing industry. student loans was a mistake,” said Mike Pierce, executive director of Mohela. the Center for Student Loan Protection, said in a statement.
Mohela officials did not immediately respond to a request for comment.
Pierce added that he hopes Education Secretary Miguel Cardona will “build on this progress and continue to protect borrowers by stripping the scandal-plagued company of its remaining operations.”
After the transfers, Mohela will continue to service federal student loans for at least 6 million borrowers, Kantrowitz estimates.
What borrowers should do during the transition
Borrowers who are transferred to another servicer should receive alerts from Mohela and their new servicer, the Ministry of Education explained.
They will then need to create an online account with their new service provider.
If you were enrolled in automatic payments with your provider, which typically results in a small reduction on your interest rate, you may need to re-enroll, Kantrowitz said.
If a borrower has a problem with their service, they can file a complaint with the Department of Education’s Federal Student Aid Unit.
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