Student Loan Errors Prompt $7.2M MOHELA Penalty

The U.S. Department of Education is withholding $7.2 million from MOHELA for not billing student loan borrowers on time. This is part of their efforts to fix servicing errors post-pandemic. MOHELA's mistake left 2.5 million borrowers without timely bills, and over 800,000 fell behind on payments. Let’s dive into the details of student loans.

Key takeaways

• The Education Department took decisive action against MOHELA, withholding $7.2 million due to late billing.
• Over 800,000 borrowers experienced delinquency on payments due to the servicer's errors
• Borrowers affected by servicing mistakes are being offered forbearance and won’t be penalized while issues are addressed

Education Department withholds $7.2 million from MOHELA

In a surprising move, the U.S. Department of Education is holding back $7.2 million from the Missouri Higher Education Loan Authority (MOHELA) because they didn't send bills on time to millions of student loan borrowers. This action is part of a bigger effort to fix servicing errors that happened after the pandemic break.

Borrowers face repayment issues

MOHELA allegedly didn’t send notifications 21 days before due dates as required, leaving about 2.5 million borrowers without timely bills. Of those, over 800,000 fell behind on payments. Borrowers also reported long wait times and poor communication, suggesting systemic issues with federal student loan servicers.

Advocates ask for further investigation

Advocates are asking for a closer look at the companies managing federal student loans. They say there are mistakes happening with all these companies.

They believe these companies weren't ready for payments to start again. This is clear from lots of reports about account errors and bad customer service.

Steps to fix borrower challenges

To ease borrowers’ frustrations, accounts facing issues will be put into forbearance. During this time, no interest will be added.

What's more, the months spent in forbearance will count toward forgiveness programs. This shows that the Department of Education is committed to sticking to the agreed standards and protecting borrowers.

Servicer accountability on the line

MOHELA is already facing penalties for its mistakes, and if other servicers also don't meet their duties, more action might follow. The Education Department holding MOHELA accountable could stop other servicers from being careless in the future.

Navigating through private student loans

People dealing with private student loans, like the ones serviced by MOHELA, might face confusing situations. That's why we at TuitionHero offer a clear and quick guide to private student loans for students and parents.

Refinancing strategies as a solution

For people considering refinancing their student loans in search of better rates or terms, our complete guide to student loan refinancing offers a lifeline. During tough times, refinancing can be a strategy for stability, potentially making the repayment process easier.

Why trust TuitionHero

At TuitionHero, we help students and parents navigate the financial side of higher education. We offer personalized FAFSA assistance and explain how loan consolidation impacts loan forgiveness eligibility. Our resources clarify income-driven repayment plans and Public Service Loan Forgiveness. We support you in exploring options like private student loans, refinancing, and scholarships, while keeping up with the latest changes from the Education Department.

Frequently asked questions (FAQ)

What should I do if I didn't get my student loan bill on time?

If you didn't get your student loan bill on time, it's important to reach out to your servicer right away to avoid late payments. Also, check out TuitionHero to get tips on handling your student loans properly. We'll walk you through ways to protect your credit and look into options like loan forbearance or deferment for temporary relief.

Can student loan servicers be penalized for service errors?

Yes, student loan servicers can be penalized for servicing errors. As seen with MOHELA, the Education Department can withhold payments or take other corrective measures to enforce accountability. For detailed information on how servicers are regulated and what your rights are as a borrower, check out our section on student loan servicing.

Is there a way to prevent being negatively affected by servicer mistakes?

While you can't control servicer mistakes, you can take steps to protect yourself. Keeping detailed records, monitoring your accounts, and considering student loan refinancing are ways to maintain control over your repayment plan.

What options are available if I'm struggling to restart loan repayments after a hiatus?

If restarting loan payments is proving difficult, or you have more debt than you can handle, you might be eligible for income-driven repayment plans or other relief programs. TuitionHero has information on different repayment strategies and can help you with FAFSA to see if you qualify for federal aid or other payment plans.

Final thoughts

The Education Department holding back funds from MOHELA highlights a crucial time for accountability in student loan servicing. It reminds us that borrowers need reliable support and resources, like what TuitionHero offers, to navigate the confusing world of student finance. As we see how servicers respond to more attention and the need for accurate billing, we stay committed to giving borrowers the tools they need to plan their financial futures with confidence.

Source

• Education Dept. withholds $7.2M in payments to MOHELA over late billing statements
• MOHELA Error Sparks Student Loan Forbearance for Millions - NerdWallet