A student-loan company involved in a major lawsuit against Biden's debt relief just got hit with a cease and desist over accusations of 'interfering with student loan borrowers' right to loan cancellation'

• Advocacy groups AFT and SBPC sent a cease and desist letter to student-loan company MOHELA.
• They said the company's involvement in a lawsuit against relief violates consumer protections.

Advocates aren't letting a student-loan company involved in a lawsuit against debt relief off easy.

On Tuesday, advocacy groups the American Federation of Teachers (AFT) and the Student Borrower Protection Center (SBPC) sent a cease and desist to student-loan company MOHELA that accused it of "interfering with student loan borrowers' right to loan cancellation" that President Joe Biden announced at the end of August, according to the letter.

At the end of September, six Republican-led states filed a lawsuit against Biden's up to $20,000 in debt relief under the argument it would hurt their states' tax revenue, along with the business operations of MOHELA, which is housed in Missouri where the lawsuit was filed. A federal judge is set to hear oral arguments on Wednesday on whether the relief should be paused. Biden's administration already issued its defense as to why the conservative lawsuit does not have standing, and advocates want to ensure MOHELA does not further harm borrowers during this process.

"Student loan giant MOHELA has grown fat on federal contracts and back-room deals with big banks. Now its executives think they are above the law and are using the courts to put their profits above the interests of student loan borrowers," SBPC executive director Mike Pierce said in a statement.

The groups also noted that MOHELA's actions could be a "potential liability" under the California Student Borrower Bill of Rights and the Consumer Financial Protection Act. Specifically, California has a bill of rights for student-loan borrowers in the state that prohibits student-loan companies from engaging in certain practices that could harm borrowers, and companies that violate that prohibition could face a lawsuit on behalf of all affected borrowers that could leave it liable for over $175 billion in damages.

The cease and desist letter noted that seeking to block debt relief and understaffing call centers could constitute such behavior.

"Our investigation revealed that MOHELA has understaffed its call centers: borrowers report wait times of many hours with no reply and receiving busy signals from the phone line or a message that the number does not exist," the letter said. "Borrowers with critical questions about student debt relief, such as how to apply, whether to consolidate their loans, or otherwise, cannot receive the information they are legally entitled to receive from their servicer."

Should the lawsuit progress, AFT and SBPC estimate the cost of injury to borrowers in California would amount to over $55 billion.

MOHELA could not immediately be reached for comment, but the Republican lawsuit on behalf of the company — which also manages the Public Service Loan Forgiveness (PSLF) program — noted that when borrowers' balances go to zero, it will suffer revenue loss from servicing those loans.

The Biden administration said in its legal defense that the case does not have any standing, but the advocates want to ensure that whether or not it prevails, borrowers are left unscathed.

"MOHELA's scheme isn't just a betrayal of the trust it owes millions of student loan borrowers, it is part of a larger pattern of illegal behavior and must end now," Randi Weingarten, President of the AFT, said in a statement. "People with student debt in California and across the country have a right to life-changing debt relief and we will not let a rogue student loan company stand in the way."