What to know about the loan servicer at the center of the Supreme Court student debt fight

The Supreme Court is expected to rule on President Biden’s student debt relief plan as soon as Thursday, and one loan servicer in particular has been thrown into the center of the debate.

The Missouri Higher Education Loan Authority, more commonly known as MOHELA, is one of the largest federal student loan servicers in the country and a central player in Biden v. Nebraska.

Before deciding whether Biden’s plan is lawful, the court must first rule that at least one of the challengers — six Republican-led states, and two individual borrowers — has legal standing to bring their lawsuit.

The states and individuals promote various standing arguments. But the justices in particular have focused on MOHELA, mentioning the servicer 142 times during February’s oral arguments.

Here’s what to know about MOHELA and its role in the Supreme Court fight over student debt relief:

What is MOHELA?

MOHELA has been in the student loan business for more than 40 years. Missouri state legislators created it in 1981 to provide low-cost loans for students and a source of revenue for the state.

The servicer works with private and federal student loans and assists borrowers in answering questions about billing and payment options. MOHELA is able to collect payments, inform borrowers about different payment options and help with requests for forbearance or deferment. 

It has also become the sole student loan servicer for Public Service Loan Forgiveness (PSLF) and the Teacher Education Assistance for College and Higher Education (TEACH), two federal loan payment options for individuals with certain jobs. 

MOHELA makes money from its contract with the federal government, which pays the servicer a monthly amount for each student loan borrower they are servicing. The amount it gets paid for servicing a loan can vary depending on the status of the loan, whether a student is still in school or a borrower is in delinquency. 

MOHELA is supposed to transfer its proceeds to the state in two ways.

In 2007, state lawmakers passed a bill that provided for MOHELA to transfer $350 million to the Lewis and Clark Discovery Fund, which funds capital improvement projects at public colleges across the state. The servicer so far has given $245 million, according to court filings.

It has also contributed more than $100 million over the last 12 years to state scholarship and grant programs, court documents indicate.

Why does MOHELA matter in the student debt fight?

The Supreme Court’s conservative majority appeared skeptical during oral arguments that the Biden administration had the authority to forgive hundreds of billions of dollars in debt for more than 40 million borrowers.

But before the court can strike down the plan, the justices must first find that at least one of the eight plaintiffs has legal standing to bring their lawsuit. 

Missouri’s standing theory — which involves MOHELA — has received the most attention.

Standing requires a plaintiff to show three components: they suffered an injury-in-fact, the defendant caused the injury and that the court can remedy it.

The Biden administration contends that none of the states or individual borrowers can meet all three prongs, so the Supreme Court should throw out their lawsuits and allow the debt relief to proceed.

But Missouri has put MOHELA in the center of the fight by indicating that the servicer will lose revenue if student debt forgiveness is given to borrowers, arguing the plan would eliminate many accounts MOHELA collects fees from.

“These financial losses establish Missouri’s standing for two reasons: (1) MOHELA is a Missouri-created and -controlled public instrumentality, so its harms are harms to the State; and (2) MOHELA’s losses jeopardize its financial contributions to Missouri,” the state wrote in its brief.

The administration has pushed back on both fronts, first contesting that MOHELA is an arm of the state.

It also rejects that any losses MOHELA faces would lead the state to miss out on financial contributions from the servicer. MOHELA hasn’t paid funds to the Lewis and Clark Discovery Fund in years and has previously said further payments were not probable, U.S. Solicitor General Elizabeth Prelogar told the justices.

Although the Biden administration has not directly advanced the argument, some outside groups have further questioned whether MOHELA would actually suffer a net loss from the debt relief plan in the first place.

MOHELA did not respond to The Hill’s request for comment. 

Why isn’t MOHELA a party in the case?

Proponents of Biden’s debt relief plan have pushed back on Missouri’s standing argument by noting that the loan servicer itself has not challenged the plan.

“MOHELA’s executives were not involved with the decision of the Missouri Attorney General’s Office to file for the preliminary injunction in federal court on September 29, 2022,” the servicer wrote in a letter to Rep. Cori Bush (D-Mo.) last year.

MOHELA became the elephant not in the room at February’s Supreme Court oral argument: The word “MOHELA” appears 142 times in the transcript.

The administration indicated it wouldn’t contest standing if MOHELA had sued instead. That caught the attention of conservative Justice Amy Coney Barrett, who along with the court’s liberals probed the attorney representing the states about it.

“Why didn’t the state just make MOHELA come then?” Barrett asked. “If MOHELA is really an arm of the state and all of this would be a lot easier — I mean, the solicitor general conceded that if MOHELA was here, MOHELA would have standing. If MOHELA is an arm of the state, why didn’t you just strong-arm MOHELA and say, ‘You’ve got to pursue this suit?'”

Nebraska Solicitor General James Campbell responded, “That’s a question of state politics.”

“But we believe as a matter of law that the state has the authority to assert its interests,” he added.

MOHELA has not put out any public statements for or against the case Republicans are arguing on its behalf, but internal emails obtained by Student Borrower Protection Center showed some employees were completely taken aback finding out they become the main focal point of canceling student loan forgiveness. 

“MOHELA isn’t technically a part of that lawsuit, the Missouri AG is suing on their behalf. However, it’s all about the [Federal Family Education Loan] stuff, and since they changed the rules, that lawsuit should be ruled as lacking standing,” read one email from an employee, whose name was partially redacted.