Chairing Hearing, Warren Slams MOHELA for Failures During Return to Repayment, Impact on Borrowers
“Despite receiving numerous warnings and federal funding throughout the payment pause to get ready, every single student loan servicer failed to adequately prepare for the transition [back to repayment].”
Washington, D.C. — Today, U.S. Senator Elizabeth Warren (D-Mass.), chair of the Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, led a hearing on student loan servicer Higher Education Loan Authority of the State of Missouri (MOHELA) and its failures during borrowers’ return to repayment, including MOHELA’s mismanagement of the Public Service Loan Forgiveness program. The hearing follows a new report, released today by Senator Warren, which revealed 3.9 million billing errors by servicers during the return to repayment, and a decades-long pattern of student loan servicer incompetence and misconduct that has affected millions of borrowers nationwide.
Senator Warren, in her opening statement, detailed MOHELA’s record of repeated failures and its impact on millions of Americans.
Senator Warren called attention to MOHELA’s poor performance during the return to repayment, in which it failed to send timely billing statements to 2.5 million borrowers, leading the Department of Education to withhold $7.2 million in payments to the servicer. Senator Warren also highlighted MOHELA’s failure to appropriately staff-up in preparation for the return to repayment and its “call deflection” scheme — leading to a call abandonment rate of 35 percent. Senator Warren then called out MOHELA for mishandling the PSLF program and preventing millions of teachers, nurses, service members and firefighters from accessing the relief they were owed under law.
Senator Warren concluded her opening remarks by detailing MOHELA’s involvement in blocking President Biden’s first debt cancellation plan, and chastised MOHELA CEO Scott Giles for declining her invitation to testify and answer for MOHELA’s wrongdoings.
The full text of Senator Warren’s opening remarks are available below:
Opening Statement
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy
Wednesday, April 10, 2024
As Prepared for Delivery
This hearing will come to order.
I’m holding today’s hearing because I’m concerned that student loan servicers are – once again – failing millions of borrowers.
This is my third hearing on student loan servicer misconduct. My first one was my first hearing as chair of this Banking Subcommittee – in April 2021. At that hearing, Senator Kennedy and I heard deeply troubling testimony about how student loan servicers were intentionally making misrepresentations to borrowers and preventing them from getting relief the law said they deserved.
A lot has happened since then. PHEAA and Navient, the two student loan servicers that testified at our hearing, have left the federal student loan system, as have other servicers. President Biden moved to cancel student loan debt for 43 million Americans, and a radical Supreme Court blocked that relief for borrowers.
But, President Biden did not give up. By fixing existing programs, he has already canceled student debt for nearly 4 million borrowers, more than any president in history. And he has moved forward with a Plan B to expand debt relief to tens of millions more. In total, President Biden’s actions—once finalized—will cancel student debt for 30 million Americans. That’s 30 million lives changed forever.
Today, we focus on the servicers—the corporations that have made hundreds of millions of dollars administering the student loan program. Student loan payments were paused during the COVID-19 pandemic. Last year, the pause ended, and borrowers returned to repayment. Despite receiving numerous warnings and federal funding throughout the payment pause to get ready, every single student loan servicer failed to adequately prepare for the transition.
A new report I released today reveals that servicers badly misled borrowers during the return to repayment. These servicers made millions of billing errors and received thousands and thousands of borrower complaints. Servicers subjected borrowers to long phone waits, with some borrowers waiting for hours before getting a hold of a live person—and that was true even when the servicer had made a mistake that could be corrected only by reaching a live person. Servicers had years to prepare for this transition to repayment – and they still screwed up.
MOHELA was one of the worst. MOHELA serves over 8 million borrowers and is the only servicer for Public Service Loan Forgiveness borrowers. MOHELA has caused problems for millions of people.
First, MOHELA’s performance during borrowers’ return to repayment was shockingly bad. After payments resumed in October, MOHELA sent the wrong bills to approximately 300,000 borrowers and sent late billing statements to 2.5 million borrowers. MOHELA’s failures led the Department of Education to withhold $7.2 million in payments.
Last year, I wrote to all of the servicers and the Department of Education, requesting information about the servicing problems facing borrowers. The data I got back was shocking. The numbers showed that MOHELA had the longest average call wait time of any servicer. As borrowers once again began to make payments, MOHELA had a call abandonment rate of 35 percent. Let me say that again: one in three MOHELA borrowers were on hold or shuffled around so long that they just gave up on their calls. Evidently, MOHELA figured out that if it made the call system impenetrable, MOHELA wouldn’t have to talk with so many people who were having problems.
Maybe it’s no surprise then that MOHELA received the most complaints of any federal student loan servicer in 2023.
MOHELA has failed borrowers of all kinds, but it has been particularly derelict in its duties administering the Public Service Loan Forgiveness program. P-S-L-F is how we say thank you to teachers, nurses, service members, and others who borrow money to go to school, then use their educations working in public service. Under MOHELA’s watch, the backlog of P-S-L-F forms hit a peak of 1 million. This meant that many teachers and nurses didn’t get the relief they were entitled to until much later, so late that some borrowers continued to make payments on debts that should have been canceled.
MOHELA knew that it had problems, and many of those problems caused borrowers to call for help. Last month, a blockbuster report by the Student Borrower Protection Center and American Federation of Teachers documented MOHELA’s response to those calls. Instead of just hiring and training more people to help clean up the mess it had made, MOHELA implemented a “call deflection” scheme. This meant that a firefighter or teacher who called would be diverted away from live agents to dead-end parts of its website. The borrower had no choice except to place the call again and hope for a better result.
Finally, MOHELA played a central role in blocking President Biden’s boldest attempt to fix this broken student loan system through the litigation against the President’s first debt cancellation plan. If it weren’t for MOHELA, 43 million borrowers might have gotten student debt relief from President Biden.
Clearly, there are serious problems at MOHELA—problems that have an impact on millions of borrowers. So I invited MOHELA’s CEO Scott Giles to testify at today’s hearing and provide Congress and the American people with some answers. He refused my invitation—a flat “no.”
Think about that: His company gets paid hundreds of millions of taxpayer dollars to administer a federal program. It’s a mess, and, instead of answering for his failures, Giles goes into hiding. I don’t understand why MOHELA should be let within 10,000 feet of a student loan program. And I think it’s long past time that the Department of Education hold MOHELA accountable for its failures.
I can assure you: we are not done here – we will get answers.
At today’s hearing, we will learn more about MOHELA’s failures, our broken student loan system, and the ways that we can fix it. Student loan borrowers deserve better than MOHELA.
I’ll now hand it over to Ranking Member Kennedy to deliver his opening statement.
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