Sen. Elizabeth Warren has taken action against MOHELA (Missouri Higher Education Loan Authority) for the challenges faced by student loan borrowers as the pandemic-related payment pause ended. The Democrat from Massachusetts has requested MOHELA's CEO, Scott Giles, to testify before a Senate subcommittee on economic policy on April 10.
MOHELA, managing over 8 million federal student loan accounts, is one of the servicers contracted by the Department of Education for collecting student loan payments. Warren's letter to MOHELA highlighted mishandling of borrowers' return to repayment post the COVID-19 pause and obstacles faced by public servants seeking PSLF relief.
With more than 20 million federal student loan borrowers seeing bills due in October after a three-year payment pause, challenges were expected. The Federal Student Aid office, overseeing the financial aid system, faced increased workload without additional funding, complicating matters further.
MOHELA faced penalties from the Department of Education for delays in sending billing statements, impacting millions of borrowers. Nearly 40% of borrowers missed their first payment, prompting the Department of Education to instruct all servicers to provide administrative forbearance for affected borrowers.
Warren has expressed concerns about potential future issues and the effectiveness of the 12-month on-ramp period to protect borrowers from credit score implications due to missed payments through September 2024.
The 'chaotic resumption' of payments has raised questions about the implementation of safeguards and potential consequences for borrowers' credit scores, emphasizing the need for improved student loan servicing practices.
