Warren hammers student loan servicer MOHELA at hearing: ‘Truly shocking’

The Missouri Higher Education Loan Authority (MOHELA) took a drubbing at a Senate hearing Wednesday after a report from Democrats accused the student loan servicer of millions of billing errors, delays and “borrower abuse” since repayments began after the pandemic.

Sen. Elizabeth Warren (D-Mass.), chair of the Senate Banking subcommittee on economic policy, scolded the servicer’s CEO, Scott Giles, for refusing her invitation to testify and called for the “firing” of the company by the government.

“The data I’ve received is truly shocking,” Warren said. “[MOHELA] has been particularly derelict in its duties administering the Public Service Loan Forgiveness program,” or PSLF. 

The Missouri loan servicer is currently the sole provider of the PSLF program, but the Department of Education announced it will become its own PSLF provider. 

Congressional attention on the provider ramped up after an investigation by the Student Borrower Protection Center and the American Federation of Teachers alleged MOHELA diverted borrowers away from customer service in favor of “self-help” options for loan issues. 

According to the report released Wednesday, MOHELA failed to properly prepare for its responsibilities despite “receiving continued warnings and having the resources to do so”; has seen 2.5 million delayed or missing billing statements to borrowers; is responsible for more than 250,000 miscalculations for borrowers that resulted in higher billing amounts; and offers purposely “atrocious” customer service. 

“These failures have resulted in borrowers being unable to properly manage their loans and take advantage of long standing student debt relief programs,” the report said. 

“We’ve heard from hundreds of borrowers that this report speaks to their lived experiences,” said Persis Yu, deputy executive director of the Student Borrower Protection Center and witness at the hearing. 

“These failures create obstacles to payment, raise costs, cause distress and drive borrowers to default,” she said.

However, Scott Buchanan, executive director of the Student Loan Servicing Alliance and a fellow witness, said in his written statement that the “so-called report” was the work of “political organizations” dealing in “fiction.” 

According to Buchanan, loan service providers have struggled to navigate “constant shifting of expectation” and “programmatic seismic shifts [on top] of the previously existing web of complicating servicing requirements and workflows” from Congress and the Department of Education. 

“I warned [Education] Secretary [Miguel] Cardona in a letter dated August 22, 2022 of the issues that would occur because of the lack of proper planning and insufficient time to make staffing and operational changes required,” he said in the statement. 

Buchanan had said prior to the hearing that he wanted to make clear the “root cause of the issue is not with the servicers, it’s with the program itself.”

But Warren said “servicers had years to prepare, and they still screwed up.”

“Despite receiving numerous warnings, and federal funding throughout the payment pause, every single student loan servicers failed to prepare for the transition back to repayment, every single one,” she said.

In a statement to The Hill, MOHELA said it “remains focused on its primary mission of serving student borrowers throughout the return to repayment on-ramp period and continues to work diligently as the interim Public Service Loan Forgiveness (PSLF) servicer to process loan forgiveness for borrowers on behalf of the federal government.”

—Updated at 4 p.m.