- The Education Department withheld pay from student-loan company MOHELA over repayment errors.
- A group of Democrats said MOHELA is not properly communicating with borrowers since the announcement.
Several Democratic lawmakers aren't happy with the way a major student-loan company is resolving account errors for millions of borrowers.
On Tuesday, Sens. Elizabeth Warren, Ed Markey, Chris Van Hollen, and Richard Blumenthal sent a letter to student-loan company MOHELA's CEO Scott Giles over repayment concerns. Specifically, the Education Department recently announced it would be withholding over $7 million of October pay from MOHELA after it failed to send on-time billing statements to 2.5 million borrowers.
While the Education Department said it instructed MOHELA to place impacted borrowers on administrative forbearance without any interest accrual until the errors are resolved, the lawmakers wrote that the guidance to borrowers about that forbearance has sparked confusion, rather than relief.
"The notices MOHELA provided to borrowers regarding their errors fail to explain how or why borrowers were placed in administrative forbearance, including omitting any mention of MOHELA's error being the cause," the letter said.
"Without any explanation, borrowers may reasonably believe they were responsible and seek to end the forbearance," it continued. "In fact, MOHELA's notice tells borrowers that they may decline or request to end the forbearance. If that happens, resumed payment amounts may still be incorrect — due to MOHELA's error — and borrowers may face financial hardship."
The lawmakers wrote that while the administrative forbearance will help borrowers by not requiring their student-loan payments, the lack of clear guidance surrounding changes to their accounts can pit borrowers "at risk of financial anxiety and insecurity."
"MOHELA must get its house in order immediately," they wrote.
.@MOHELA has failed to provide borrowers with accurate, timely information about their loans, forcing millions into forbearance. It's unacceptable. MOHELA must immediately update borrowers on its latest error and take action to improve their communication. pic.twitter.com/yKdYeyTfV3
— Ed Markey (@SenMarkey) November 8, 2023
As a result of MOHELA's "inadequate" response to borrowers' errors, the Democrats asked Giles to provide further information on the company's outreach to borrowers by November 21, including MOHELA's planned outreach on administrative forbearance, how many complaints it has received since September 1, 2023, and how many borrowers have declined forbearance while still having errors on their accounts.
Following the announcement to withhold MOHELA's pay, the Education Department also released an internal memo from Federal Student Aid outlining the errors it observed across all servicers since repayment began in October. For example, 78,000 borrowers got inaccurate bills when they converted to the new SAVE income-driven repayment plan, and 21,000 borrowers received statements with "very high and potentially incorrect amounts due," per the memo.
The Education Department said it will continue oversight over servicers to crack down on mistakes that are putting borrowers at risk. "Our oversight efforts have uncovered errors from loan servicers that will not be tolerated," Education Secretary Miguel Cardona said in a statement.
"The actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures," he said.
Are you experiencing challenges with student-loan repayment? Share your story with this reporter at asheffey@insider.com.