The American Federation of Teachers is escalating its legal fight against one of the nation’s largest student loan servicers, arguing that conditions for borrowers have not improved (and may have worsened) since the lawsuit was first filed last summer. Lawsuit Says MOHELA Still Failing Student.
On January 15, the union filed an amended complaint (PDF File) against the Higher Education Loan Authority of the State of Missouri, better known as MOHELA, in federal court in Washington, D.C. The revised filing expands on earlier allegations that MOHELA violated consumer protection law by failing to provide basic loan servicing functions, including accurate billing, timely processing of repayment and forgiveness applications, and meaningful access to customer service.
The amended complaint also introduces new federal government performance data comparing student loan servicers – data that, according to the filing, places MOHELA at the bottom of the pack for customer service.
What The Amended Lawsuit Alleges
The original lawsuit, filed in July 2024, accused MOHELA of engaging in deceptive and unlawful practices in violation of the District of Columbia Consumer Protection Procedures Act. The amended complaint argues that MOHELA’s problems are not isolated pandemic-era failures but instead reflect ongoing business decisions that prioritise cost-cutting and growth over borrower support. Lawsuit Says MOHELA Still Failing Student
According to the filing, the Department of Education has paid MOHELA more than $1.1 billion since 2011 to service federal student loans. Today, MOHELA services more than seven million borrower accounts nationwide, including a disproportionate share of borrowers pursuing Public Service Loan Forgiveness.
- Fail to send timely or accurate billing statements
- Miscalculate income-driven repayment amounts
- Delay or mishandle applications for forgiveness programs such as PSLF
- Collect payments borrowers were not required to make
- Fail to issue refunds owed to borrowers
- Provide inaccurate or misleading information about borrowers’ options
- Make it extraordinarily difficult for borrowers to reach a live customer service representative
The AFT argues that these failures have concrete financial consequences for borrowers, including unnecessary payments, missed forgiveness credit, damaged credit standing, and prolonged debt burdens. Lawsuit Says MOHELA Still Failing Student
New Data Highlights Customer Service Breakdowns
One of the most striking additions to the amended complaint is new federal data comparing how long borrowers wait to speak with customer service representatives at different loan servicers.
According to the Department of Education’s performance metrics for loan servicers cited in the filing, MOHELA borrowers wait about seven times longer than borrowers serviced by EdFinancial to speak with a representative. Compared with borrowers at Aidvantage, CRI, and Nelnet, MOHELA borrowers wait more than 50 times as long. Lawsuit Says MOHELA Still Failing Student
Call abandonment rates tell a similar story. While no other major federal loan servicer sees more than 5 percent of callers hang up before reaching a representative, MOHELA’s abandonment rate exceeds 14 percent—nearly three times higher.
The amended complaint argues that these numbers are not accidental. Instead, it alleges MOHELA intentionally relies on “call deflection” strategies (routing borrowers to automated systems, websites, or self-service tools) rather than staffing call centres adequately.
For borrowers, that can mean hours on hold, dropped calls, unanswered messages, and unresolved account errors.
How This Impacts Student Loan Borrowers
Student loan servicers are the primary point of contact for federal borrowers. They send bills, process payments, calculate repayment plans, and track progress toward forgiveness. When servicers fail, borrowers often have nowhere else to turn. Lawsuit Says MOHELA Still Failing Student
- Made payments that were never credited to their accounts
- Continued paying after being told they would receive refunds
- Were placed into forbearance incorrectly, delaying forgiveness
- Were misinformed about income-driven repayment recertification deadlines
- Lost months of qualifying payments toward Public Service Loan Forgiveness
For borrowers pursuing PSLF (teachers, nurses, first responders, and other public servants), servicing errors can be especially costly. A single misapplied payment or unnecessary forbearance can delay loan cancellation by months or even years.
The AFT argues that these problems persist even as federal policy changes have made accurate servicing more important than ever, including repayment restarts, income-driven repayment adjustments, and ongoing litigation affecting repayment plans.
What Borrowers Can Do Right Now
The case comes at a time when millions of borrowers are navigating repayment after years of pandemic-era disruptions, shifting repayment plans, and legal challenges to student loan relief programs. Accurate servicing and accessible customer support are essential for borrowers to make informed financial decisions.
The AFT argues that MOHELA’s conduct demonstrates the need for stronger consumer protections and greater accountability in the student loan system. The amended complaint seeks injunctive relief, civil penalties, and changes to MOHELA’s practices under D.C. consumer protection law.
The lawsuit does not immediately change borrowers’ obligations or erase debt. Court cases can take years, and outcomes are uncertain. Still, the amended complaint highlights issues borrowers should watch for closely. Lawsuit Says MOHELA Still Failing Student
Borrowers with MOHELA-serviced loans may want to:
- Keep detailed records of payments, billing statements, and communications
- Save screenshots or PDFs of account histories and correspondence
- Double-check that payments are being credited correctly
- Monitor progress toward forgiveness programs
- Escalate unresolved issues through the Federal Student Aid Ombudsman or the Consumer Financial Protection Bureau
Borrowers experiencing errors may also benefit from filing formal complaints with their own state attorneys’ general, which can help document systemic problems and trigger additional oversight.
The student loan system will closely monitor the lawsuit’s success and its potential to bring about lasting changes for borrowers.
Frequently Asked Questions
What is the MOHELA lawsuit about?
It’s a federal lawsuit alleging that MOHELA has repeatedly failed to service federal student loans properly. The complaint claims widespread errors like inaccurate billing, delays in processing paperwork, misleading borrowers, poor customer service, and mishandling forgiveness applications. The amended filing seeks court orders to change MOHELA’s practices and civil penalties under consumer-protection law.
Who filed the lawsuit against MOHELA?
The American Federation of Teachers (AFT) filed the lawsuit. They are represented by legal advocates, including the Protect Borrowers group and the National Consumer Law Center. Lawsuit Says MOHELA Still Failing Student
What is MOHELA and what does it do?
MOHELA is the Higher Education Loan Authority of the State of Missouri, a large federal student-loan servicer. It manages billing, payment processing, repayment plan changes, forgiveness tracking, and customer support for millions of federal student loans on behalf of the U.S. Department of Education.
What specific problems are MOHELA borrowers experiencing?
Reported problems include late or incorrect bills, miscalculated payments, delays in processing repayment or forgiveness applications, improper payment collections, failure to issue refunds owed, and misinformation about loan options. Many borrowers also struggle to reach live customer service.
How does MOHELA’s customer service compare to other student loan servicers?
Federal government data cited in the lawsuit shows MOHELA ranks near the bottom on customer service metrics, with some of the longest waits and highest call abandonment rates compared with other major federal servicers.
How many borrowers does MOHELA currently service?
MOHELA services more than seven million federal student loan borrowers.
Does this lawsuit mean my MOHELA student loans will be forgiven or cancelled?
No. The lawsuit challenges MOHELA’s servicing practices but does not automatically cancel or forgive individual loans. Court cases can take time and outcomes aren’t guaranteed. Any forgiveness for your specific debt depends on separate federal programs and eligibility. Lawsuit Says MOHELA Still Failing Student.
What should I do if I think MOHELA has mishandled my student loans?
If you believe errors occurred:
- Keep detailed records of statements, communications, and payments.
- Check that your payments and credits are applied correctly.
- Contact the Federal Student Aid Ombudsman or the Consumer Financial Protection Bureau (CFPB) to report issues.
- You might also consider complaints to your state attorney general.
How does this lawsuit affect Public Service Loan Forgiveness (PSLF) borrowers?
The suit highlights that MOHELA has mishandled the tracking and processing of PSLF credits for many public service borrowers. While it doesn’t change your eligibility, problems with how credits are counted could delay or complicate your progress toward forgiveness.
What are my rights as a MOHELA borrower in the event of improper loan servicing?
You have rights under federal law to accurate billing, correct accounting of payments, clear information about your options, and fair handling of repayment or forgiveness requests. If these aren’t met, you can file complaints with federal agencies, pursue legal assistance, or use advocacy groups to help enforce your rights. Lawsuit Says MOHELA Still Failing Student.
Where can I get help if I’m struggling with MOHELA or my student loan payments?
You can seek help from:
- You can seek assistance from the Federal Student Aid (FSA) contact centres.
- You can also seek assistance from the Federal Student Aid Ombudsman Group for dispute resolution.
- The Consumer Financial Protection Bureau (CFPB) is a resource for filing complaints about servicing.
- Counselling organisations for student loans provide guidance on repayment or forgiveness.