MOHELA
MOHELA (Higher Education Loan Authority of the State of Missouri) is a quasi-governmental student loan servicer created by Missouri in 1981. It serviced about 6.6 million federal Direct Loan accounts as of June 2025, and it also services FFELP and private loans for third-party lenders. It was the sole servicer for the Public Service Loan Forgiveness program from 2022 until May 2024, when PSLF moved to the Department of Education. Federal borrowers are assigned to MOHELA by the Department and cannot choose or switch servicers.
Score generated by AI agents based on publicly cited evidence and reviewed by the project maintainer. Not independently validated. Last assessed 2026-09-25. Score revised 2026-09-25: 72 → 63.
Score History
Timeline events are AI-curated from public reporting. Score trajectory is derived from documented events.
Missouri created MOHELA in 1981 as a quasi-governmental secondary market for guaranteed student loans under FFELP, with a governor-appointed board. For 25 years it was a regional loan holder and servicer with no documented servicing scandals. The record for this period is thin, and scores stay low.
Days after MOHELA's board fired executive director Mike Cummins, who opposed the plan, Governor Blunt proposed selling MOHELA's assets to fund campus construction. The 2007 Lewis and Clark law required a $350 million transfer to the state. The attorney general sued the board over open-meetings violations, the state auditor sued for its records, and a 2007 audit flagged executive bonuses, $2.3 million in severance and an undocumented headquarters contract. The 2010 end of FFELP then removed MOHELA's original business model.
MOHELA joined the Department of Education's servicer team under the not-for-profit servicer program and began receiving Direct Loan accounts, which grew into a portfolio of about 2.5 million borrowers before the pandemic. Borrowers were assigned to it without choice, and it became one of five Business Process Operations vendors in 2020. Few MOHELA-specific servicing problems are documented for this decade.
FedLoan's exit made MOHELA the sole PSLF servicer, and its portfolio grew to about 7.8 million borrowers. The PSLF form backlog rose from about 250,000 to over one million while MOHELA was paid per processed form. The Nelnet transfer began producing duplicate credit records, and Missouri used MOHELA's fee revenue as standing in Biden v. Nebraska. By August 2023 MOHELA was warning senators that it could not hire more staff before repayment resumed.
When payments resumed, MOHELA sent late bills to 2.5 million borrowers and 800,000 became delinquent, and the Department withheld $7.2 million. The MOHELA Papers exposed its call-deflection playbook. Its call abandonment rate hit 35%, and it drew 41% of federal-loan complaints with 20% of accounts. PSLF moved to the Department in May 2024 and about 1 million accounts were moved to another servicer. The AFT and Maldonado lawsuits followed, along with a California consent order and a 56-member call to consider terminating its contract.
The Department's October 2024 contract-violation notice, over more than 460,000 unprocessed IDR applications, halted new account assignments and began a period in which MOHELA shrank and lost ground in court. Federal accounts fell to 6.6 million by June 2025 and the Department began moving part of its PSLF portfolio elsewhere. Seven attorneys general opened probes, its immunity bids failed at the Supreme Court in March 2026, and a federal court found it violated California law. Service stayed the worst among servicers, with false delinquency notices in August 2026 drawing a new Senate investigation.
Alternatives
Federal Direct Loan borrowers do not choose their servicer: the Department of Education assigns accounts to MOHELA and moves them between servicers at its own discretion, as with the 2022 transfer of all PSLF borrowers to MOHELA and the partial PSLF-portfolio transfer the Department announced in 2025. Borrowers cannot request a transfer away from MOHELA over poor service, and refinancing into a private loan to escape it gives up federal protections such as income-driven repayment and Public Service Loan Forgiveness. PSLF itself has been administered by the Department on StudentAid.gov since May 2024, but borrowers assigned to MOHELA still depend on it for billing and day-to-day servicing.
Dimensional Breakdown
Summaries below were written by AI agents based on the cited evidence. They are editorial interpretations, not independent research findings.
Dimension History
Timeline (50 events)
Missouri Legislature Creates MOHELA as Quasi-Governmental Loan Authority
The Missouri General Assembly created the Higher Education Loan Authority of the State of Missouri through HB 326, signed June 15, 1981 and effective September 28, 1981, to ensure eligible post-secondary students had access to guaranteed student loans. MOHELA operated as a nonprofit secondary market for Federal Family Education Loan Program (FFELP) loans. It was set up as a quasi-governmental public instrumentality rather than a state agency, with most board members appointed by Missouri's governor.
Governor Blunt Proposes Selling MOHELA to Fund Campus Projects
Missouri Governor Matt Blunt proposed selling MOHELA and using the proceeds for university construction projects, scholarships and research, the plan later branded the Lewis and Clark Discovery Initiative. Goldman Sachs projected a sale would bring in $375 million to $425 million. Missouri Democratic Party leaders accused Blunt of wanting to sell the authority to Sallie Mae, and Blunt denied any secret negotiations. On January 24, 2006, the MOHELA board voted 4-3 to fire executive director Mike Cummins, who opposed the plan; the board chose 21-year agency veteran Raymond Bayer Jr. over the governor's preferred replacement. A 2007 state audit later found MOHELA paid almost $2.3 million in severance to four executives who left between 2003 and 2006, including $853,381 to Cummins.
Attorney General Nixon Sues MOHELA Board Over Open-Meetings Violations
Missouri Attorney General Jay Nixon sued MOHELA's board in February 2006, alleging 12 violations of the state's Open Meetings and Records Law between January 20 and January 31, the period in which the board voted 4-3 to fire executive director Mike Cummins, who opposed Governor Blunt's plan to sell MOHELA. Depositions taken for the suit showed Blunt had told two board members by phone, hours before the vote, that he wanted Cummins replaced.
Missouri State Auditor Sues MOHELA for Withholding Records
State Auditor Susan Montee sued MOHELA in Cole County after its board refused to open records pertaining to legal matters and attorney-client relations from its closed meetings, which it withheld citing legal protections even after being served with a subpoena. Montee's office said in a news release that the documents were "necessary for the completion of a thorough and accurate audit." MOHELA countersued. The dispute arose during the audit the auditor's office was conducting as the legislature debated the governor's proposal to sell MOHELA's assets.
Lewis and Clark Discovery Initiative Enacted, Mandating $350 Million Transfer
Governor Blunt signed Senate Bill 389, which required MOHELA to transfer a total of $350 million to the state's Lewis and Clark Discovery Fund over six years for capital projects at Missouri colleges and universities. MOHELA transferred the initial $230 million on September 14, 2007, but missed or reduced its quarterly payments from March 2008; a 2010 state audit found a shortfall of about $21 million as of June 30, 2009. The plan diverted MOHELA's accumulated surplus to state priorities rather than to borrowers.
Missouri State Auditor Flags MOHELA Governance and Spending Issues
The first comprehensive state audit of MOHELA, released in October 2007, found excessive executive compensation and spending. Five executives received performance bonuses totaling almost $1.5 million from fiscal 2001 through 2004, and four departing executives were paid almost $2.3 million in severance benefits. MOHELA could produce no documentation of how the contractor for its roughly $11 million headquarters was selected, and competitive bids appear not to have been solicited. The audit also flagged board retreats at a luxury resort and more than $688,000 in employee holiday gift cards and bonuses. In its response, MOHELA noted that six of seven board members and its top executives had begun serving in or after January 2006.
FFELP Program Abolished, MOHELA Pivots to Direct Loan Servicing
The Health Care and Education Reconciliation Act of 2010 ended the Federal Family Education Loan Program on July 1, 2010, eliminating the business model MOHELA had operated under since 1981. All new federal education loans would now be made through the Direct Loan Program, pushing MOHELA and other FFELP participants to compete for federal servicing contracts. Borrowers with existing commercially held FFELP loans stayed with their holders unless they consolidated into Direct Loans, and FFEL loans were later subject to special rules under the IDR account adjustment and PSLF. When the Education Department announced that adjustment in April 2022, NPR reported that it acknowledged pervasive inaccuracies in loan servicers' counts of borrowers' qualifying IDR payments and pledged a one-time revision of past payments.
MOHELA Wins Federal Direct Loan Servicing Contract
MOHELA was awarded a federal loan servicing contract under the Department of Education's Not-For-Profit (NFP) Servicer Program, with Direct Loan borrower accounts transferring from the Direct Loan Servicing Center beginning in late October 2011. This marked MOHELA's entry into federal Direct Loan servicing, a portfolio that would grow over the following decade into millions of borrower accounts.
GAO Finds Deficiencies in Education Department Oversight of Student Loan Servicers
The Government Accountability Office found that the Department of Education's servicer performance metrics were misaligned with borrower outcomes. Past compliance reviews had found that servicers failed to provide borrowers with full grace periods before repayment began, but these findings had no effect on Direct Loan account allocations the following year. GAO recommended minimum call center standards, improved complaint tracking, and realigned performance metrics, noting that borrowers reported similar concerns in the 2014 and 2015 customer satisfaction surveys.
COVID-19 Payment Pause Suspends Federal Student Loan Payments
Federal student loan payments and collections were paused and interest set to zero on ED-held loans starting in March 2020, with the pause later extended until payments restarted in late 2023. According to AFT's 2024 complaint, relatively fewer accounts needed proactive servicing during the pause, yet MOHELA still struggled to meet borrowers' needs, with excessive call wait times. MOHELA continued to receive federal servicing fees during the pause and still did not adequately staff up for the return to repayment; AFT alleges MOHELA pursued its massive servicing contract while implementing operational cost-cutting measures such as reduced staff.
MOHELA Selected as One of Five Business Process Operations Servicers
Under its Next Gen initiative, the Department of Education contracted with five vendors in June 2020 to perform Business Process Operations (BPO), a centralized contact center and back-office processing function operating under the single FSA brand. MOHELA was one of the five BPO vendors while also servicing loans under a separate contract, deepening its role in the federal student loan system. Under that separate servicing contract, servicers were paid a per-borrower monthly fee that depended on the loan's repayment status ($0.45 to $2.85 under the 2014 contracts, more for current borrowers than delinquent ones), according to The College Investor.
MOHELA Becomes Sole PSLF Servicer After FedLoan Exit
After FedLoan Servicing (PHEAA) chose not to renew its contract, the Department of Education moved the Public Service Loan Forgiveness program and PSLF borrowers to MOHELA, making it the sole PSLF servicer. Transfers began in early July 2022, and FSA reported in December 2022 that all PSLF borrowers had been moved from FedLoan to MOHELA.
Missouri Files Lawsuit to Block Biden Student Debt Relief Using MOHELA Standing
Missouri, joined by Kansas, Nebraska, South Carolina, Arkansas and Iowa, sued in federal court to block the Biden administration's plan to cancel up to $20,000 in student debt (about $430 billion), basing standing largely on MOHELA's projected loss of about $44 million a year in fees. MOHELA itself did not sue; responding to an October 2022 letter from Rep. Cori Bush, it said it was not involved in the decision to file the case and had no contractual relationship or agreement with the Missouri attorney general's office. Internal MOHELA emails released in 2023 showed an employee asking 'Are we the bad guys?' and another writing that they thought MOHELA 'was opposed to this move, but couldn't do anything about it.'
Nelnet-to-MOHELA Transfer Generates Nearly 2 Million Credit Reporting Errors
The transfer of student loan accounts from Nelnet to MOHELA caused nearly 2 million duplicate records to appear on borrowers' credit reports. MOHELA allegedly failed to notify credit reporting agencies of the transfers, despite established protocols requiring advance notice. Over 100,000 borrowers had incorrect credit scores, with thousands seeing drops of more than 20 points. The errors persisted for up to 18 months.
PSLF Form Backlog Balloons From 250,000 to Over One Million Under MOHELA
Federal data show that when MOHELA became the sole PSLF servicer in July 2022 there were roughly 250,000 unprocessed PSLF forms; the backlog then peaked at more than one million and stayed around 800,000 (FSA's June 2023 report showed nearly 890,000). A MOHELA document produced on June 17, 2023 showed it had denied nearly 5,000 borrowers and placed nearly 11,000 on hold, including workers at qualifying public employers. Because MOHELA was paid per processed form ($8.17), a wrongful denial followed by a resubmission or reconsideration earned it a second payment.
Internal MOHELA Emails Expose Employee Distress Over Missouri Lawsuit
The Student Borrower Protection Center published internal MOHELA emails, obtained under Missouri's Sunshine Law, showing staff confusion after Missouri sued to block student debt relief. One employee asked 'Are we the bad guys?'; another wrote that they thought MOHELA 'was opposed to this move, but couldn't do anything about it,' and that the Missouri AG was suing on MOHELA's behalf.
Supreme Court Strikes Down $430 Billion Student Debt Relief in Biden v. Nebraska
In a 6-3 decision, the Supreme Court ruled that the Biden administration's student loan forgiveness program exceeded executive authority, blocking relief for approximately 40 million borrowers. The Court found Missouri had standing based on MOHELA's projected $44 million annual revenue loss. The decision used a quasi-governmental student loan servicer's financial interests to prevent the largest consumer debt relief program in U.S. history.
MOHELA Tells Senators It Cannot Hire More Staff for Return to Repayment
In an August 8, 2023 letter to Democratic senators, MOHELA said it would not be able to hire additional staff for the expected surge when payments resumed, citing its fixed-rate government contract, and that it anticipated extended wait times and servicing delays while relying on self-service options. Class-action complaints filed against MOHELA cited wait times of up to nine hours in 2022. MOHELA earned $68.7 million in PSLF servicing fees in fiscal 2023.
Sweet Settlement Lawyers Accuse MOHELA of Wrongly Putting Discharged Borrowers Into Repayment
Attorneys for the class in Sweet v. Cardona sent MOHELA a letter demanding it comply with the borrower defense settlement, which requires class members' loans to stay in forbearance until their discharges are carried out. The letter documented borrowers whom the Department had told their debt would be cancelled but whom MOHELA told to resume payments in October 2023, and it said the Department's group discharges for Corinthian, ITT and other schools had not been completed.
Federal Student Loan Payments Resume After 3.5-Year COVID Pause
Federal student loan payments resumed on October 1, 2023, ending a three-and-a-half-year payment pause. MOHELA was responsible for sending billing statements and managing repayment for approximately 7.8 million borrower accounts, up from approximately 2.5 million before the pandemic. Despite years of preparation time and continued receipt of servicing fees during the pause, MOHELA's systems proved catastrophically unprepared.
MOHELA Fails to Bill 2.5 Million Borrowers, ED Withholds $7.2 Million
The Department of Education announced that MOHELA had failed to send billing statements on time to 2.5 million borrowers, some receiving bills only seven days before the due date, and that more than 800,000 of them missed their October payment as a result. ED withheld $7.2 million from MOHELA's October payment and directed it to place affected borrowers in forbearance. An internal FSA memo also found 16,000 borrowers with pending for-profit fraud claims had been wrongly returned to repayment.
16,000 For-Profit College Fraud Victims Erroneously Returned to Repayment
An internal Department of Education memo found that about 16,000 borrowers who had applied to have their loans cancelled because they were defrauded by for-profit colleges (borrower defense claims) were erroneously returned to repayment instead of being kept in payment-free forbearance while their claims were reviewed.
MOHELA Papers Expose Call Deflection Scheme and Perverse PSLF Incentives
AFT and the Student Borrower Protection Center published 'The MOHELA Papers,' a 47-page investigation revealing a company-wide 'call deflection' playbook that diverted borrowers away from customer service representatives to non-functional website resources. The report documented that MOHELA advised ED to '[e]xclude any phone numbers' from communications and identified 28 topics for which no self-service options existed. The report also revealed MOHELA's perverse financial incentive: being paid for both PSLF denials and subsequent re-reviews.
MOHELA Sends Cease-and-Desist Letter, Inadvertently Confirms Billing Failures
MOHELA sent a cease-and-desist letter to the Student Borrower Protection Center demanding retraction of The MOHELA Papers. However, the letter inadvertently confirmed that 875,000 borrowers missed at least one payment after MOHELA failed to send bills, that only 65% of affected borrowers paid on time, and that MOHELA was not adequately staffed to meet customer needs. AFT forwarded the letter to ED's Inspector General.
Senate Economic Policy Subcommittee Hearing on MOHELA Failures
Senator Warren chaired a Senate Banking Subcommittee on Economic Policy hearing on MOHELA's failures during the return to repayment. She said MOHELA sent wrong bills to about 300,000 borrowers and late bills to 2.5 million, had the longest average call wait of any servicer and a 35 percent call abandonment rate, and received the most complaints of any federal servicer in 2023. MOHELA CEO Scott Giles declined her invitation to testify.
California DFPI Consent Order Fines MOHELA $27,500
California's Department of Financial Protection and Innovation announced a consent order with MOHELA for failing to provide borrower contact information on time for the state's outreach about the IDR one-time account adjustment deadline. MOHELA was the only one of 15 servicers contacted that missed the deadline, delaying outreach by three weeks, and agreed to pay $27,500 in administrative penalties. The DFPI called it the first public action by a state regulator against MOHELA for violating state consumer protection law.
PSLF Servicing Transferred from MOHELA to Department of Education
Beginning May 1, 2024, the Department of Education moved administration of the PSLF and TEACH Grant programs from MOHELA to its own systems on StudentAid.gov as part of the new USDS servicing contract. Borrowers could no longer see PSLF progress or payment counts on MOHELA's portal, and ED paused PSLF form processing for about three months during the transition. Borrowers stayed with their loan servicer, including MOHELA, for day-to-day servicing.
AFT Files Landmark Consumer Protection Lawsuit Against MOHELA
The American Federation of Teachers filed a groundbreaking consumer protection lawsuit against MOHELA in DC Superior Court, alleging violations of consumer financial protection laws affecting 8 million borrowers. The suit alleged MOHELA overcharged 280,000 borrowers using incorrect calculation guidelines, made unauthorized automatic withdrawals, and systematically denied access to income-driven repayment plans and PSLF forgiveness.
For-Profit College Borrowers Sue MOHELA for Refusing to Process Loan Discharges
California borrowers filed Maldonado v. MOHELA, alleging the servicer never processed Department of Education-ordered loan discharges for students defrauded by six predatory for-profit institutions including ITT Tech, Corinthian Colleges, and Marinello Schools of Beauty. MOHELA continued reporting cancelled debts to credit agencies and illegally demanding payments from borrowers whose loans should have been discharged.
Over 50 Members of Congress Call for MOHELA Contract Termination
Senator Elizabeth Warren and Representative Jim Clyburn led 56 colleagues in a letter asking the Department of Education to evaluate whether MOHELA had met its contractual obligations and, if not, to consider terminating its contracts. The letter cited the new AFT and PPSL lawsuits and noted MOHELA had received $1.1 billion to date under its federal contract to service loans for 8 million borrowers.
MOHELA Argues Federal Law Preempts AFT's Consumer Protection Claims
In a brief in American Federation of Teachers v. MOHELA, MOHELA argued that the union's consumer protection claims are preempted by the Higher Education Act. The CFPB's 2024 Student Loan Ombudsman report cited the brief as an example of servicers claiming that their federal contracts shield them from consumer protection law.
MOHELA's Predatory Website Terms of Use Exposed
Protect Borrowers revealed that MOHELA had quietly updated its website Terms of Use to prohibit borrowers from sharing screenshots, publicizing repayment information, or sharing account information with anyone, potentially including government regulators. The Terms assert that even if found liable, MOHELA will only pay $100 regardless of actual harm. The 'sole remedy' for dissatisfied users is to stop using the website, despite it being mandatory for millions of borrowers to make payments.
Education Department Halts New Accounts to MOHELA Over 460,000 Unprocessed IDR Applications
The Department of Education delivered a contract-violation notice to MOHELA on October 15, 2024, accusing it of failing to process more than 460,000 income-driven repayment applications, continuing to apply interest to borrowers' accounts, incorrectly marking some borrowers for negative credit reporting and delaying forgiveness for qualifying borrowers. The Department stopped assigning new borrower accounts to MOHELA, required weekly meetings with FSA and a corrective action plan within 10 business days, and threatened to terminate its contract if performance did not improve.
Two Government Watchdogs Issue Reports Confirming Systemic MOHELA Failures
Both the CFPB Student Loan Ombudsman and the FSA Ombudsman released reports finding that MOHELA received more complaints than any other student loan company in America, a volume that far outpaced its market share. The reports documented processing errors including lost account histories, miscalculated monthly bills, incorrect automatic withdrawals, and denial of access to lower monthly payments.
Senate Investigation Confirms 2 Million Credit Reporting Errors from Loan Transfer
A Senate investigation confirmed that the Nelnet-to-MOHELA loan transfer caused nearly 2 million duplicate student loan records on borrowers' credit reports, with errors persisting for up to 18 months. Over 200,000 consumers were identified as affected between January 2023 and August 2024, with over 100,000 receiving incorrect credit scores and thousands experiencing drops exceeding 20 points.
Senators Escalate Investigation into MOHELA's Predatory Website Terms
Senators Warren, Blumenthal, and Duckworth ramped up their investigation into MOHELA's website Terms of Use, sending follow-up demands to MOHELA CEO Scott Giles. The senators highlighted that MOHELA's terms prohibiting borrowers from sharing account information with anyone, capping liability at $100, and requiring the 'sole remedy' of ceasing website use were potentially illegal given that borrowers have no choice but to use the site.
Missouri Backs MOHELA's Supreme Court Bid for Sovereign Immunity
In MOHELA v. Good (No. 24-992), MOHELA asked the Supreme Court to review a Tenth Circuit ruling that it is not an arm of the state entitled to Eleventh Amendment immunity from a borrower's Fair Credit Reporting Act suit. Missouri filed an amicus brief supporting MOHELA, arguing it is entitled to sovereign immunity and portraying scrutiny of MOHELA as retaliation for Missouri's litigation against Biden-era debt relief.
Seven Attorneys General and Two State Regulators Investigate MOHELA
Attorneys general from Washington, New York, Pennsylvania, Colorado, Illinois, Massachusetts, and the District of Columbia launched coordinated investigations into MOHELA, forming a multi-state working group. California and Oregon regulators also opened separate inquiries. The investigations focused on MOHELA's billing errors, processing failures, and potential violations of state consumer protection laws.
Advocates Warn of Trump Administration Interference in MOHELA Oversight
AFT and the Student Borrower Protection Center provided evidence to Inspectors General that senior Trump administration officials were conspiring to block oversight of MOHELA. James Bergeron, who formerly headed a lobbying group representing servicers including MOHELA, was identified as potentially impeding law enforcement scrutiny of his former client. The CFPB had reportedly been told to 'deprioritize' student loan enforcement cases.
MOHELA Sends SAVE Borrowers False Interest-Accrual Notices
Borrowers in the SAVE plan's 0% interest administrative forbearance received MOHELA notices saying interest continued to accrue, and some saw balances rising. After days of confusion MOHELA posted a public notice that interest was set at 0% for these borrowers and that the notice was not a bill, and reports attributed the error to a system issue. Borrowers trying to confirm their status faced long hold times.
MOHELA Cuts Headcount While Adding Private-Loan Portfolio, Fiscal 2025 Statements Show
MOHELA's fiscal 2025 financial statements report servicing fees of $313.1 million and an operating loss of $6.0 million, after a $37.8 million loss in fiscal 2024. Federal accounts fell to 6.6 million from 7.1 million. Employees and contracted employees fell to 2,582 at June 30, 2025 from 3,094 a year earlier and a peak of 3,481 in November 2023, even though MOHELA hired over 800 people from July 1, 2024 to service a new third-party portfolio that generated $94.2 million in revenue.
Court Denies MOHELA's Second Attempt to Dismiss Maldonado Lawsuit
The U.S. District Court for the Northern District of California denied MOHELA's second attempt to dismiss Maldonado v. MOHELA, rejecting its argument that the Department of Education was a required party. The court had earlier rejected MOHELA's state sovereign immunity defense, writing that it would be an affront to California's dignity to let an entity like MOHELA avoid suit there over alleged commercial misconduct toward California residents. The case proceeds on behalf of California borrowers.
Education Department Moves to Transfer Part of MOHELA's PSLF Portfolio
In a letter to Senator Warren, the Department of Education said FSA intended to transfer a portion of MOHELA's PSLF portfolio to other servicers later in 2025 to help it manage 'multiple strains' on its portfolio. The Department did not say how many accounts would move or when. Servicing transfers have historically caused errors for borrowers, who have no say in them.
MOHELA Joins Missouri Brief Backing NJ Transit's Sovereign Immunity Claim
MOHELA and the State of Missouri filed an amicus brief in the Supreme Court supporting New Jersey Transit's claim that state-created corporations share their state's immunity from suit in other states' courts, an argument MOHELA also makes in borrower lawsuits against it. On March 4, 2026 the Court rejected NJ Transit's claim 9-0, holding that immunity does not extend to state-created corporations that are formally liable for their own judgments.
AFT Files Amended Complaint Detailing Ongoing MOHELA Misconduct Through 2025
AFT filed an amended complaint in its lawsuit against MOHELA (now in the U.S. District Court for the District of Columbia), detailing how MOHELA has continued to harm borrowers since the suit was filed in July 2024. It cites federal data showing MOHELA has by far the worst customer service of the five main servicers: its borrowers wait about seven times as long as EdFinancial borrowers and more than 50 times as long as Aidvantage, CRI and Nelnet borrowers, and its call abandonment rate exceeds 14%, while no other servicer's tops 5%.
Court Rules MOHELA Violated California Law by Billing Borrowers With Approved Discharges
In Maldonado v. MOHELA, Judge Chhabria of the Northern District of California granted in part both sides' summary judgment motions. He held that, at least from the time the Department put borrowers on its discharge lists sent to MOHELA, MOHELA violated California's Student Borrower Bill of Rights and Unfair Competition Law by sending billing statements and other communications that misstated what they owed. Other claims remain open, and class certification is set for briefing in late 2026.
Supreme Court Denies MOHELA's Sovereign Immunity Petition in MOHELA v. Good
The Supreme Court denied MOHELA's petition for certiorari in MOHELA v. Good, leaving in place the Tenth Circuit's ruling that MOHELA is not an arm of Missouri entitled to Eleventh Amendment immunity from a borrower's Fair Credit Reporting Act suit. The petition, backed by Missouri and a group of states, had been pending since March 2025 and was decided shortly after the Court's March 4, 2026 NJ Transit ruling.
AFT v. MOHELA Stayed as Parties Pursue Settlement
The American Federation of Teachers' consumer protection suit against MOHELA, in the U.S. District Court for the District of Columbia, was paused in March 2026 so the parties could explore settlement. In an early June joint status report they said they had held good-faith discussions and asked for another 60-day pause, with an update due July 17. MOHELA's motion to dismiss had been denied without prejudice in September 2025. No settlement had been announced.
MOHELA Sends False Delinquency and Default Warnings to Borrowers in Forbearance
Beginning around August 1, 2026, MOHELA borrowers who were current or in SAVE forbearance with $0 due were shown past-due balances of roughly $2,000 to more than $6,700, some marked up to 12 months behind, and received e-mails warning of default. In at least one case StudentAid.gov still showed the account in forbearance. MOHELA's phone lines were closed over the weekend. The Department of Education later said fewer than 6,000 borrowers were affected. The error came as about 7 million borrowers were being moved off SAVE.
Nine Senators Open Investigation Into MOHELA's False Delinquency Notices
Senators Elizabeth Warren and Jeff Merkley, joined by seven colleagues including Bernie Sanders, wrote to MOHELA CEO Scott Giles about delinquency notices that told borrowers their loans were 'severely past due,' that payment in full was required or that they risked wage garnishment, in one case showing a total amount due over $10,000. They asked how many borrowers were affected and paid, and whether MOHELA would refund them, with answers due September 10, 2026. They also urged the Department to rehire its eliminated servicer oversight team.
Evidence (53 citations)
D1: User Value Erosion
D2: Business Customer Exploitation
D3: Shareholder Extraction
D4: Lock-in & Switching Costs
D5: Twiddling & Algorithmic Opacity
D6: Dark Patterns
D7: Advertising & Monetization Pressure
D8: Competitive Conduct
D9: Labor & Governance
D10: Regulatory & Legal Posture
Scoring Log (9 entries)
Checked 7 removed/trimmed claims: 0 restored, 6 partly restored, 1 confirmed removed, 0 already present. Partly restored: Montee audit-records quote and 'legal matters and attorney-client relations' (Columbia Missourian; LCDI $230M/shortfall figures already in LCDI item); ED's acknowledgment of inaccurate IDR payment counts (NPR 2022-04-19, new d5 evidence); AFT's reduced-staff allegation (AFT complaint); per-borrower servicing fees by repayment status (College Investor 2021, new d3 evidence); 2021 servicer exits consolidating the field (College Investor 2021, new d8 evidence, partial restore of the dropped 'dozen to fewer than five' evidence title, whose counts stay unsupported); MOHELA telling Rep. Bush it was not involved in the suit (Missouri Independent 2023-06-30, new d10 evidence). Confirmed removed: undated FFELP secondary-market 'borrowers had no say' item (cited Fox Business piece never mentions MOHELA; MOHELA's secondary-market role is already in the 1981 founding item).
Empty list kept (government assignment). alternativesReason corrected: it still said all PSLF borrowers are routed to MOHELA as sole PSLF servicer, but per the fact-checked record PSLF moved to the Department in May 2024; rewrote around assignment and discretionary transfers (2022, 2025) and why private refinancing is not a real alternative (loses IDR/PSLF).
Checked 78 items + prose. 34 verified, 29 corrected (14 date-only), 13 re-sourced, 2 removed (1 undated generic industry item, 1 about FedLoan not MOHELA). Key fixes: timeline[33] Supreme Court brief was Missouri's sovereign-immunity amicus, not a MOHELA preemption brief; AG probes were 7 AGs + 2 regulators, not 9 AGs; hearing abandonment rate 35% not 14% (7x/50x/14% figures are from the Jan 2026 amended complaint); 16,000 were pending fraud-claim borrowers; Maldonado second denial was July 2025 and not about immunity; LCDI enacted May 2007, auditor suit April 2007; severance $2.3M was to four execs 2003-2006; dead AllAboutLawyer content-farm links replaced; IDR April 2025 backlog overstated by ~336k.
72->63. Since Feb 2026: Maldonado court found MOHELA violated California law (Mar 10), Supreme Court denied MOHELA v. Good cert (Mar 23) after rejecting NJ Transit immunity 9-0, AFT suit stayed for settlement talks (Mar-Jul), false delinquency notices (Aug 2026, <6,000 borrowers per ED) and a 9-senator investigation (Aug 27); earlier in window MOHELA joined NJ Transit immunity amicus (Sep 2025). D1 9->8 (recalibration: 2023-24 billing collapse now sits in its own era; present failures serious but smaller), D2 8->7 (recalibration: per-form PSLF incentive ended May 2024), D3 7->5 (recalibration: nonprofit with FY2024-25 operating losses; cost control, not profit extraction), D4 9->7 (recalibration: transfer harms peaked 2022-24; PSLF counts now on StudentAid.gov), D5 7->6 (recalibration: errors now checkable against StudentAid.gov), D7 4->3 (correction: fact audit found per-borrower incentive claim unsourced), D8 7->5 (recalibration: preemption/immunity defenses fit 4-6; Biden v. Nebraska was Missouri's action), D9 6->7 (event: FY2025 statements show headcount 3,481->2,582 amid worst-in-class waits). D6 and D10 unchanged. Eras: current era re-dated 2026-02-16->2024-10-15 (ED contract-violation notice halting new accounts) and relabeled 'Terminal Legal Siege'->'Sanctions and Legal Siege'; 'FFELP Regional Servicer' re-dated 1981-09-01->1981-09-28 and relabeled 'FFELP Secondary Market'; 'Lewis & Clark Extraction' re-dated 2007-01-01->2006-01-26 (Blunt sale proposal) and relabeled 'Lewis & Clark Transfer'; 'Federal Contract Expansion' re-dated 2011-10-01->2011-10-03; 'PSLF Takeover Crisis' and 'Repayment Catastrophe' kept. Trajectory worsening->stable.
Triaged 2026-06-29; no rescore warranted (no material change since baseline, or changes sub-threshold).
Updated description: MOHELA no longer sole PSLF servicer (transferred to DOE May 2024). All dimension summary claims verified factually accurate.