A top teachers union and an advocacy group for student loan borrowers are turning up the heat on one of the country’s biggest student loan companies.
The American Federation of Teachers and the Student Borrower Protection Center are accusing the company of mismanaging a key student loan program for public service workers and engaging in a “call deflection scheme” by strategically avoiding borrowers who need help.
The groups this week released a trove of internal documents, obtained through public information laws, from the Missouri Higher Education Loan Authority, or MOHELA. The student loan company, or servicer, works with borrowers nationwide.
“We have ample evidence to show that something rotten is happening in Missouri,” said Mike Pierce, the executive director of the Student Borrower Protection Center.
The company called the accusations false, disingenuous and “nothing more than a PR campaign.”
“It is unfortunate and irresponsible that information is being spun to create a false narrative in an attempt to mislead the public,” a MOHELA spokesperson said in a statement to USA TODAY on Thursday. “MOHELA remains committed to helping the millions of student loan borrowers that we serve.”
The back-and-forth escalates the fraught relationship between student loan companies and key Democratic constituencies, who continue to pressure the federal government to dismantle the student loan system.Meanwhile, the Biden administration is relying on companies like MOHELA to help carry out signature debt relief policies, in an election year where student loan forgiveness is already playing a big role.
The 47-page report, published Wednesday, provides a glimpse into how one of the country’s biggest student loan providers handled the return of bills this fall.
Overall, jumpstarting the student loan system after the pandemic has been far from simple. A major percentage of borrowers did not pay their bills at all when they first came due.
Read more:4 in 10 student loan borrowers missed first payment since pandemic
The report suggests MOHELA failed these borrowers by confusing them with a "byzantine loop of misinformation and false promises" when they called to ask for help. The company's critics say the end goal was to keep borrowers from getting their problems resolved, which would save MOHELA money.
The Education Department said the Biden administration has made clear it won’t let borrowers pay for the actions of student loan companies. In October, the feds issued a $7.2 million penalty to MOHELA for failing to send millions of borrowers their bills on time when payments resumed.
Read more:MOHELA made borrowers delinquent. Now the student loan servicer is being penalized
What are the accusations?
There are two big allegations the advocacy groups are making.
The first involves the Public Service Loan Forgiveness, or PSLF, program. The federal policy allows student loan borrowers who work in public service-oriented jobs – teachers or government employees, for example – to have their loans fully canceled if they've spent a decade responsibly paying them down. MOHELA facilitates student loans for all PSLF borrowers.
The report says MOHELA has profited from a backlog in PSLF applications that the company allowed to “explode,” with nearly one million unprocessed forms awaiting officials' attention. It says servicers incorrectly told some borrowers they didn’t qualify for the program, and inaccurately counted the payments borrowers made to be eligible for full relief.
In a joint statement this week, Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., chastised MOHELA over the conduct described in the report.
“Our nation’s public servants, members of the military, and first responders deserve far, far better,” they wrote.
A MOHELA spokesperson said the company has doled out $43.8 billion in PSLF loan forgiveness to more than 606,000 borrowers through January of this year. The company said it doesn’t have the authority to process relief without authorization from the federal government, which can take a long time.
MOHELA denied it profited from any stalled applications.Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a trade group representing servicers, called that notion – that the company intentionally benefited from stalled applications – "nonsense."
'Deflecting' calls?
The report's second major allegation is something it characterizes as a “call deflection scheme,” which it says MOHELA used to divert borrowers from getting help from customer service representatives.
The guidance to divert people was part of the company’s internal plan, drafted last July, for handling the return to repayment, according to the report.
“What has happened here is a pattern and practice of greed,” said Randi Weingarten, the president of the American Federation of Teachers.
MOHELA sees it differently. The company said ahead of the return to repayment, the Education Department anticipated a surge in calls and encouraged servicers to find ways to show borrowers how to handle problems on their own. The department confirmed it worked with servicers to outline strategies to help borrowers find answers to simple problems online, rather than by phone.
“Trying to encourage people who can self-service online is exactly what we should be doing,” Buchanan said.
Congressional Democrats this week urged the Consumer Financial Protection Bureau, an oversight arm of the federal government, to follow up on the allegations in the report. A spokesperson for the CFPB declined to comment.
Zachary Schermele covers education and breaking news forUSA TODAY. You can reach him by email at zschermele@usatoday.com. Follow him on X at @ZachSchermele.
