A major student-loan company owes debt of its own — but it's continuing to collect millions of borrowers' monthly bills. A Democratic lawmaker says it's time for it to pay up.

• Rep. Cori Bush sent a letter to Missouri's attorney general regarding student-loan company MOHELA.
• She asked what the state's plan is to ensure MOHELA pays its debt to the Lewis and Clark Discovery fund.

A Democratic lawmaker doesn't want to let a major student-loan company off the hook when it comes to its financial obligations.

On Thursday, Missouri Rep. Cori Bush sent a letter, first viewed by Business Insider, to the state's attorney general Andrew Bailey regarding his role in holding student company MOHELA — which is based in Missouri — accountable for its own debts.

Notably, Bailey was among the attorneys general who filed a lawsuit to block President Joe Biden's first attempt at broad student-loan forgiveness, and his case succeeded in getting the Supreme Court to strike down the relief. While MOHELA denied any direct involvement in the case, the attorneys general still claimed relief would hurt the company's revenue.

The issue now concerns a program called the Lewis and Clark Discovery Initiative. Missouri established it in 2007 to fund various state projects and higher education institutions, and MOHELA was initially expected to fund those programs.

However, following the 2008 financial crisis, MOHELA continued to receive approval to delay its payments into the fund, with its latest extension ending in 2024. Bush wants Bailey to explain how he plans to hold MOHELA to that financial obligation, which currently totals a $107 million debt to Missouri.

"Now that the conservative majority on the Supreme Court ruled in your favor and blocked millions in relief from borrowers across our state, I am respectfully requesting information on how your office is working to ensure MOHELA plans to pay its own debts to the working people of Missouri," Bush wrote.

"Before the Supreme Court, your office argued that MOHELA was an instrumentality of the State," she continued. "What is your office currently doing to ensure that MOHELA fulfills its legal obligations to the State of Missouri, the Lewis and Clark Discovery Initiative, and the nearly one million student loan borrowers across our state?"

Bailey's office did immediately respond to a request for comment from BI.

The debt MOHELA owes to Lewis and Clark had some experts questioning the attorneys general's lawsuit to block student-debt relief. Essentially, the case claimed that debt relief would hurt Missouri's tax revenue, along with the revenue of MOHELA. It also said the state still has an obligation to pay into the fund, and debt relief would harm that effort.

However, some experts said that given the fund has been dormant for years, that reasoning does not hold up. Justice Ketanji Brown Jackson also questioned that point during oral arguments in February 2023.

"So we're talking about a fund that hasn't been contributed into because the state has waived the obligation to do so for at least a temporary period of time, and then, even if the funds were to go into this particular fund, you don't have a set of plans that you are planning to pursue with them?" Jackson said.

Bush requested Bailey deliver a response regarding his plans for the Lewis and Clark fund by February 20. Her letter comes as millions of borrowers have recently resumed paying off their federal loans following an over three-year pause. Since bills started to become due in October, the Education Department has detected a range of errors across all servicers when it comes to best serving borrowers.

For example, MOHELA was the first company to be hit with a $7 million penalty for failing to send on-time billing statements to millions of borrowers. The department later withheld varying amounts of pay from the remaining servicers — Nelnet, Aidvantage, and Edfinancial — for the same reason.

While servicers cited a lack of federal funds as a reasoning for strained customer service in a letter to Democratic lawmakers in December, Bush said that with MOHELA being the sole servicer of the Public Service Loan Forgiveness program, money should not be an issue.

"MOHELA has since recovered financially and remained more profitable than ever, particularly since its acquisition of the Public Service Loan Forgiveness (PSLF) accounts, which represent a huge increase in business," she said.