- The U.S. Department of Education recently announced that it will soon transfer some student loan borrowers to another servicer.
- Here's what you need to know:
If your current federal student loan servicer is Mohela, or the Missouri Higher Education Loan Authority, the U.S. Department of Education has announced that some student loan borrowers will soon be transferred to another servicer.
Here's what you need to know about this change:
Changes impact Mohela borrowers
The Education Ministry said in an April 29 blog post that it began transferring some Mohela borrowers to other companies this week.
More than 1 million borrowers could be affected.
“Another servicer will begin administering these loans and assisting the borrowers,” the department said.
The Department of Education contracts with a variety of companies, including Mohela, Nelnet, and EdFinancial, to service federal student loans. Higher education expert Mark Kantrowitz said the company pays servicers more than $1 billion a year to do so.
Why is the transfer taking place?
According to the Ministry of Education, Mr. Mohera requested a transfer to the company, which has also been the subject of recent controversy.
In late October 2023, the government found that servicers failed to send billing statements to 2.5 million borrowers in a timely manner when the coronavirus-era payment moratorium expired, resulting in more than 800,000 borrowers becoming delinquent. denounced.
The Department of Education withheld $7.2 million in payments to Mohera for the error.
“The Mohela service interruption last fall may have been due to 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 Document,” which found that 4 out of 10 student loan borrowers served by Mohela “lost their loans in September. Since the resumption of payments, we have been experiencing inability to repay the debt.” 2023. ”
On April 10, the U.S. Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy held a hearing regarding Mohela's performance as a student loan servicer.
“Today, Mohela relinquished more than 10 percent of its total loan repayment business. “It shows that management is now aware,” said Executive Director Mike Pearce. The Student Borrower Protection Center said in a statement.
Mohera authorities did not immediately respond to a request for comment.
Pearce added that he hopes Education Secretary Miguel Cardona will “build on this progress and continue to protect borrowers by stripping the scandal-hit company of its remaining business.”
After the transfer, Mohela will continue to repay the federal student loans of at least 6 million borrowers, Kantrowitz estimates.
What Borrowers Should Do During the Transition Period
Borrowers who are transferred to another servicer should receive alerts from Mohela and their new servicer, the Department of Education explained.
You will then need to establish an online account with your new servicer.
If you're enrolled in automatic payments with your servicer, which usually gives you a slight discount on your interest rate, you may need to re-enroll, Kantrowitz said.
If a borrower encounters a problem with their servicer, they can file a complaint with the Department of Education's Division of Federal Student Aid.