Progressives are pressing the Biden administration to cut ties with a Missouri student loan servicer

WASHINGTON – A group of Democratic advocates and progressive lawmakers on Wednesday called on the U.S. Department of Education to terminate its contract with Patterna Missouri-based student loan servicing company.

U.S. Reps. Ilhan Omar of Minnesota, Ayanna Pressley of Massachusetts, Greg Casar of Texas and U.S. Sen. Ed Markey of Massachusetts called on the department to cut ties with MOHELA, also known as the Missouri Higher Education Loan Authority, during a news conference hosted by Debt Collective, which advocates for student debt cancellation.

Supporters and lawmakers have accused MOHELA of being a predatory lending company and inept student borrowers, citing mismanagement, administrative errors and long wait times for aid.

“It’s time to end their contract, it’s time to fire them, it’s time to listen to the borrowers who have been speaking out about the struggles they face, and it’s time for us to do the right thing,” he added. Omar said. “We are asking the administration to take this step forward because it is time for us to listen to the borrowers who have suffered due to MOHELI’s incompetence.”

The Department of Education did not respond to a request for comment Wednesday.

In a move he characterized as strengthening borrower protections, the department introduced a novel one responsibility initiative in November and switched to novel loan servicing agreements.

“Nothing But a Nightmare”

MOHELA is in the center two class actions in recent months, accusing the nonprofit of “failing to timely process and make decisions for student loan borrowers enrolled in the Public Service Loan Forgiveness program.”

One of the lawsuits mentions MOHELA itself, while other names both the nonprofit organization and the U.S. Department of Education.

The student loan servicer also pointed to the Student Borrower Protection Center, an advocacy group, and the American Federation of Teachers, the main teachers’ union. IN report since February, both entities have accused the nonprofit of “failing to perform basic service functions.”

They also claimed that “more than four in ten MOHELA student loan borrowers have experienced service failures since loan repayments resumed in September 2023.”

MOHELA in March sent a cease and desist letter to the Student Borrower Protection Center, accusing its report of presenting “false, misleading, and sensationalized claims and insinuations regarding MOHELA and its business activities.”

A MOHELA spokesman said Wednesday in an emailed statement that “borrowers are no better off when outside groups spread false and misleading information about our work as a federal contractor for the FSA.” The spokesperson added that MOHELA remains “committed to continuing to provide the highest quality customer service to the borrowers we serve.”

Student loan servicers are companies contracted by the federal government to handle settlement and other administrative tasks related to federal student loans, according to Federal student aid.

MOHELA serves nearly 8 million borrowers after winning a 2022 contract to operate the Department of Education’s loan forgiveness program.

Mike Pierce, executive director of the Student Borrower Advocacy Center, said during Wednesday’s event that “at every turn” MOHELA is “failing student loan borrowers.”

“They lost documents, they gave people free rein,” Pierce said, standing next to a display showing an attempt to contact one of MOHELA’s customer service representatives that seemed to last nine hours.

Randi Weingarten, president of the American Federation of Teachers, said at a press conference Wednesday that MOHELA has a “pattern of calling rejections.”

“When the most important thing to someone is a phone call, you can’t talk to someone on the phone,” Weingarten said.

Shamell Bell, a member of Debt Collective, said her interactions with her student loan servicer were “just a nightmare.”

Bell said she found herself in a “maze of misinformation, false promises and failures that are not just administrative errors” but also “systemic obstacles that threaten the financial stability and mental health of countless borrowers like me.”

More student loan forgiveness

Meanwhile, Biden administration said earlier Wednesday that it had approved $7.7 billion in additional student debt forgiveness for 160,500 borrowers. The bulk of the aid – more than $5 billion – went to nearly 67,000 borrowers participating in the Public Service Loan Forgiveness program.

Wednesday’s move brings the administration’s total loan forgiveness to $167 billion for 4.75 million Americans.

“The Biden-Harris Administration continues our efforts to provide student debt relief across the country, and this announcement reaffirms that,” U.S. Secretary of Education Miguel Cardona said in a statement. “One in 10 federal student loan borrowers approved for debt relief means that one in 10 borrowers now has financial freedom and burdens lifted.”

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