Student Loan Update: Answers Demanded After Major Error Impacts Borrowers
The group of lawmakers are asking for details on how the error occurred and how many borrowers were affected.
A bipartisan group of Democratic senators is urging MOHELA, a student loan servicer, to explain a recent error that affected numerous borrowers. Senators Elizabeth Warren and Jeff Merkley led the call for answers after discovering that MOHELA sent erroneous notices to some borrowers, warning them that their loans were severely past due and at risk of default. The senators are particularly concerned about borrowers who were actually current on their payments or not delinquent.
If a borrower received a false delinquency notice and believed they were on the brink of default, they might have made unnecessary payments, potentially spending hundreds or thousands of dollars unnecessarily. The lawmakers also want to know how many borrowers were impacted by the error and what steps MOHELA is taking to prevent such mistakes in the future.
Although MOHELA acknowledged being aware of an issue impacting a small number of borrowers, some borrowers reported never receiving correction notices and now have concerns about their credit scores. Experts suggest that the timing of the erroneous notices, which coincided with the transition from SAVE to Standard repayment plans, made it impossible for any borrower to legitimately claim they were delinquent.
The senators have requested detailed information about the scope of the problem, including whether any borrowers made payments they did not owe, how the error occurred, and what steps MOHELA is taking to prevent future issues. The investigation comes amid concerns that staffing reductions at the Federal Student Aid office have weakened oversight of loan servicers.
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