The American Federation of Teachers (AFT) has filed a lawsuit against the Higher Education Loan Authority of the State of Missouri (MOHELA), accusing the loan servicer of widespread mismanagement and failure to fulfill its responsibilities to student loan borrowers. The lawsuit, filed in the Superior Court of the District of Columbia, alleges that MOHELA’s actions have harmed millions of borrowers, particularly those in public service seeking loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.
The Background: Since 2011, the Department of Education has paid MOHELA more than $1.1 billion to help borrowers navigate their student loan options. However, AFT claims that MOHELA has consistently failed to provide the necessary assistance, leaving millions of borrowers trapped in a system plagued by errors, misinformation, and broken promises. The lawsuit highlights several key issues:
- Billing Errors: MOHELA allegedly failed to send timely billing statements to 2.5 million borrowers and used incorrect federal guidelines to calculate payments, causing 280,000 borrowers to overpay.
- Misinformation and Delays: Borrowers have reportedly been misled and misinformed about their loan options, with MOHELA failing to process applications for PSLF and income-driven repayment (IDR) plans in a timely manner. This has prevented borrowers from accessing the loan forgiveness they are entitled to.
- Customer Service Issues: The lawsuit claims that MOHELA designed a scheme to inhibit borrowers’ ability to access live customer service representatives, resulting in long wait times and poor service. Borrowers who managed to connect with representatives often received inaccurate and unhelpful information.
- Financial and Emotional Distress: AFT argues that MOHELA’s systemic failures have caused financial, mental, and emotional distress to borrowers, making it nearly impossible for them to manage their student loans effectively.
The Claims: AFT’s lawsuit makes several claims against MOHELA under the D.C. Consumer Protection Procedures Act (DCCPPA):
- Unfair and Deceptive Trade Practices: MOHELA is accused of engaging in unfair and deceptive trade practices by misrepresenting material facts, failing to provide accurate information, and misleading borrowers about their loan options.
- Failure to Meet Obligations: The lawsuit alleges that MOHELA failed to meet its basic responsibilities as a student loan servicer, including sending timely billing statements, accurately calculating payments, and providing adequate customer service.
- Financial Harm to Borrowers: AFT claims that MOHELA’s actions have caused substantial financial harm to borrowers, including forcing them to make unnecessary payments, delaying loan forgiveness, and negatively impacting their credit scores.
