The Education Department will begin shifting an unspecified number of federal student loans away from MOHELA to other servicers by year's end, according to recent correspondence between Sen. Elizabeth Warren (D-Mass.) and Education Secretary Linda McMahon.
FSA Plans Some MOHELA Loan Transfers In The Next Few Months
Reported first by Forbes, in a letter Warren's office released, Sarah Ursprung, the department's acting assistant secretary for legislation and congressional affairs, wrote, "FSA is prioritizing efforts to improve customer service to students and parent borrowers."
She added, "FSA is collaborating with MOHELA to help the servicer manage the multiple strains on its portfolio to help drive overall improvement. As part of these efforts, FSA intends to transfer a portion of MOHELA's PSLF portfolio to other servicers later this year."
Servicer Transfers Could Impact Certain Borrowers
Ursprung did not specify how many accounts will move, the precise timing, or which contractors will receive them. She indicated some, but not all, borrowers on track for Public Service Loan Forgiveness may be affected.
Current Education Department contractors include Nelnet, Aidvantage and EdFinancial, in addition to MOHELA, according to a departmental confirmation reported this week.
MOHELA has faced sustained criticism over servicing errors and long wait times. Federal Student Aid withheld $7.2 million in payments in 2023 after the company failed to send on-time bills to 2.5 million borrowers, while unions and advocates have pressed for tougher oversight. MOHELA has rejected claims of systemic mistreatment and says it acts in borrowers' best interests.
Student Loan Servicer Transfers Could Introduce Fresh Problems
It is worth noting that transfers can bring new headaches. A 2022 Consumer Financial Protection Bureau review found prior handoffs across servicers produced inaccurate statements, mismatched counts toward forgiveness and improper forbearances for hundreds of thousands of accounts. The Education Department says any new transfers "will be done thoughtfully and in a responsible way that avoids negative impacts to borrowers."
Borrowers typically receive notice before a transfer and should verify contact details and save payment records, federal guidance says. A report from early July also highlighted MOHELA processing changes affecting some income-driven repayment applicants.
Read Next:
Photo Courtesy: NLM Photo / Shutterstock.com
