MOHELA Student Loans: Repayment, Problems, and Your Rights

If your student loan statements come from MOHELA, you are one of millions of borrowers whose debt is managed by this major federal student loan servicer. Understanding who MOHELA is, what it is supposed to do, and how to navigate its complex systems is the first step toward successfully managing your repayment.

For many, interacting with MOHELA student loans has been a source of significant frustration, marked by billing errors, processing delays, and widespread customer service issues. These are not isolated incidents; they are part of a documented pattern of systemic failures that have led to federal investigations, lawsuits, and penalties. This report provides a clear and detailed examination of MOHELA, from its core functions and repayment options to its history of controversy and, most importantly, the actionable steps you can take to protect your financial rights.

Your MOHELA Student Loans: The Role of a Federal Servicer

Before you can effectively manage your loans, it is essential to understand the entity you are dealing with. MOHELA is not your lender, but a powerful intermediary with a complex history that directly impacts the service you receive.

Defining MOHELA: More Than Just a Name on Your Bill

The Missouri Higher Education Loan Authority, or MOHELA, is a large, non-profit organization contracted by the U.S. Department of Education to be a federal student loan servicer. Its job is to handle the day-to-day administrative tasks associated with your federal student loans.

These core responsibilities include:

• Managing Loan Accounts: Keeping track of your loan balance, interest accrual, and payment history.
• Processing Payments: Collecting your monthly payments and applying them to your account.
• Administering Repayment Plans: Helping you enroll in and manage various repayment options, from the Standard 10-year plan to complex Income-Driven Repayment (IDR) plans.
• Borrower Assistance: Guiding you through options for financial hardship, such as deferment and forbearance, and processing applications for loan forgiveness programs.

Servicer vs. Lender: A Critical Distinction

One of the most common points of confusion for borrowers is the difference between a loan servicer and a loan lender. It is a critical distinction that defines your relationship with MOHELA. MOHELA does not own your federal student loans and did not lend you the money. The U.S. Department of Education is the lender and owner of all federal Direct Loans.

MOHELA is the company the government pays to act as the administrative go-between. It is a federal contractor hired to manage the loan on behalf of the government. This relationship dynamic is the source of significant friction. MOHELA's actions are dictated by the terms of its federal contract and the requirements set by Federal Student Aid (FSA). While this provides a framework for its duties, it has also been used by the company to deflect accountability for servicing failures, creating a challenging environment for borrowers seeking resolution.

A Brief History: From Missouri Authority to National Servicing Giant

MOHELA's evolution from a state-based entity to one of the nation's largest and most controversial servicers is key to understanding its current operational challenges. The company was founded in 1981 by the Missouri General Assembly with a public-service mission: to ensure students in Missouri had access to loans under the then-dominant Federal Family Education Loan Program (FFELP).

The landscape of student lending was radically altered in 2010 when Congress passed legislation that eliminated the FFELP for all new loans, shifting all federal lending to the Direct Loan program, where the government lends directly to students. This change posed an existential threat to FFELP lenders like MOHELA, forcing them to find a new business model to survive.

MOHELA pivoted aggressively, pursuing a contract to service loans directly for the Department of Education. In 2011, it succeeded, becoming the nation's first non-profit (NFP) servicer to secure a Direct Loan servicing contract. This marked the beginning of a period of explosive growth. Its portfolio ballooned from approximately 365,000 borrower accounts at the start of fiscal year 2012 to over 8.4 million by the fall of 2023.

This expansion was dramatically accelerated in 2022 when another major servicer, Fed Loan Servicing, ended its contract and MOHELA took over its massive portfolio. This included becoming the sole servicer for the highly complex Public Service Loan Forgiveness (PSLF) program. This rapid, large-scale expansion appears to have stretched MOHELA's operational capacity to its breaking point.

The company's public-service origins are now in direct conflict with its reality as a massive federal contractor struggling to perform its duties. This tension came to a head in the landmark Supreme Court case Biden v. Nebraska, where the state of Missouri argued that forgiving millions of loans would cause financial harm to MOHELA's revenue. For millions of borrowers, this case cemented the perception that MOHELA's financial interests were being prioritized over their well-being.

Managing Your Account and Making Payments

Effectively managing your MOHELA account requires navigating its online systems and understanding how your payments are handled. Taking proactive steps can prevent common errors and save you a significant amount of money over the life of your loan.

Navigating the MOHELA Portals: Which Website to Use

A common source of initial confusion is finding the correct website to access your account. MOHELA operates multiple online portals, and using the right one is essential.

• For most Federal Direct Loans: The primary portal is mohela.studentaid.gov.
• For loans transferred from Navient: If your FFELP or private loans were part of the large transfer from Navient, you will need to use servicing.mohela.com.
• General Information: The main corporate website, mohela.com, contains general information and links to the various login portals.

When your loans are first transferred, you must create a new online account with MOHELA, even if you had one with your previous servicer. This registration process typically becomes available 24-48 hours after you receive notification that MOHELA is your new servicer.

Payment Methods: From Auto-Debit to Mail

MOHELA offers several ways to make your monthly payment.

• Auto Pay (Auto Debit): By enrolling, your payments are automatically deducted from your bank account. Most federal loans are eligible for a 0.25% interest rate reduction while enrolled, which can lead to considerable savings. You can enroll through the "Auto Pay" section of your online account.
• One-Time Online Payments: You can log in to your account at any time to make a single, manual payment.
• Phone Payments: Payments can be made through MOHELA's automated phone system 24/7 or by speaking with a representative during business hours.
• Mail Payments: You can mail a check or money order. It is critical to find the correct payment address by logging into your online account, as it can vary. Always include your 10-digit account number on the check.

Making Extra Payments: A Critical Guide to Paying Down Your Debt Faster

Many borrowers try to pay off their loans faster by sending in extra money. However, a poorly understood feature of MOHELA's system can undermine these efforts if not handled correctly. By default, when MOHELA receives an overpayment, it often applies the extra funds to your next month's bill, putting your account in a "paid ahead" status.

This means your due date is advanced, and you won't be considered late if you skip the next payment. While this can be a helpful buffer, it does not automatically reduce your principal balance faster. Interest continues to accrue on the same high principal, minimizing the benefit of your extra payment.

To ensure your extra money goes directly toward reducing your principal balance, you must provide "special payment instructions." Log in to your online account and use the "Custom Pay" feature. This allows you to specify that any amount over your regular payment be applied immediately to the principal of a specific loan, ideally the one with the highest interest rate.

Accessing Key Documents: Statements and Tax Forms

Maintaining your own records is crucial. Your MOHELA portal provides access to essential documents.

• Monthly Billing Statements and Correspondence: All official communications can be found in the "Inbox" of your online account. It is highly recommended to enroll in "paperless" delivery to ensure you have a clear digital trail.
• Student Loan Interest Statement (Form 1098-E): If you paid $600 or more in student loan interest, MOHELA will provide you with a Form 1098-E for your taxes, which is typically available for download in your online account.

How to Contact MOHELA Customer Service

When you need to speak with someone, having the correct contact information is essential.

• Phone Numbers:
• Direct Loan & FFELP Servicing: 1-888-866-4352  
• International: 636-532-0600  
• Hours of Operation (Central Time):
• Monday 7 a.m. - 8 p.m.
• Tuesday-Wednesday 7 a.m. - 7 p.m.
• Thursday-Friday 7 a.m. - 5 p.m.
• Secure Messaging: For non-urgent issues or to create a written record, use the secure messaging feature within your online account portal.  

Federal Student Loan Repayment Plans Available Through MOHELA

The federal student loan system offers a variety of repayment plans. MOHELA is responsible for administering these plans for the loans it services. Choosing the right plan can dramatically affect your monthly payment and the total cost of your loan.

Time-Based Plans: Predictable Payments

These plans have a set repayment term, resulting in predictable, though sometimes high, monthly payments.

• Standard Repayment Plan: This is the default 10-year plan. While monthly payments can be higher, this plan is the fastest way to repay your debt and results in the least amount of total interest paid. 
• Graduated Repayment Plan: Payments start low and then increase every two years, typically over a 10-year term. This can make payments more manageable early in your career, but you will pay more in total interest.
• Extended Repayment Plan: For those with over $30,000 in debt, this plan extends your term to 25 years. This significantly lowers your monthly payment, but you will pay substantially more in total interest.

Income-Driven Repayment (IDR) Plans: Payments Tied to Your Earnings

IDR plans are a critical lifeline for borrowers whose income is low relative to their debt. These plans calculate your monthly payment based on a percentage of your discretionary income. After 20 or 25 years, any remaining loan balance is forgiven.

• Saving on a Valuable Education (SAVE) Plan: The newest IDR plan, SAVE calculates payments at 5-10% of discretionary income and includes an interest subsidy. If your payment doesn't cover the monthly accrued interest, the government forgives the rest, preventing your balance from growing.
• Pay As You Earn (PAYE) Plan: PAYE sets payments at 10% of discretionary income and offers forgiveness after 20 years. This plan is no longer available to new enrollees as of July 1, 2024.
• Income-Based Repayment (IBR) Plan: IBR sets payments at 10-15% of discretionary income, with forgiveness after 20 or 25 years. It is available for both Direct Loans and some older FFELP loans.  
• Income-Contingent Repayment (ICR) Plan: This is the oldest IDR plan, with payments at 20% of discretionary income. It is the only IDR plan available to borrowers with Parent PLUS loans, though they must first be consolidated.

Important Note on the SAVE Plan: As of mid-2024, the SAVE plan has been subject to federal court injunctions. This has forced the Department of Education to place many SAVE applicants into an administrative forbearance while legal challenges are resolved. Processing for other IDR plans has largely resumed.

Comparing Federal Repayment Plans

The complexity of these options is a primary source of borrower confusion. This table provides a clear, side-by-side comparison.

Options for Financial Hardship: Deferment and Forbearance

If you are facing financial difficulties, MOHELA can help you access temporary relief options like deferment and forbearance. While both allow you to pause payments, they have very different financial consequences.

Understanding Deferment

Deferment is a temporary postponement of payments for a specific, qualifying reason. For certain loan types (Direct Subsidized Loans, Subsidized Stafford Loans, and Perkins Loans), the U.S. government pays the interest that accrues during the deferment period.

Common reasons for eligibility include:

• In-School Enrollment
• Unemployment (up to three years)
• Economic Hardship (up to three years)
• Military Service
• Cancer Treatment

Understanding Forbearance

Forbearance also allows you to temporarily suspend or reduce payments. However, interest continues to accrue on all loan types, including subsidized loans. If you do not pay this interest, it will be capitalized (added to your principal balance) at the end of the forbearance, increasing the total amount you will repay.

Impact on Loan Forgiveness

Using these relief options comes with a significant trade-off. Most periods of deferment and all periods of forbearance do not count toward the qualifying payments required for loan forgiveness under PSLF or IDR. This delays your progress toward debt freedom. In many cases, enrolling in an IDR plan is a better alternative, as a $0 payment under an IDR plan still counts as a qualifying payment.

Loan Forgiveness, Discharge, and Cancellation Programs

For many borrowers, the ultimate goal is to have their remaining loan balance forgiven. MOHELA administers several federal programs that can lead to debt cancellation.

Public Service Loan Forgiveness (PSLF)

The PSLF program forgives the remaining federal student loan debt for borrowers who work full-time for a qualifying government or non-profit employer after making 120 qualifying monthly payments. From July 2022 to May 2024, MOHELA was the exclusive servicer for the PSLF program, a period marked by massive processing backlogs and improper denials.

In May 2024, the Department of Education took over direct management of the PSLF program. Borrowers now use tools on StudentAid.gov to certify employment and apply for forgiveness. A recent development is the PSLF Buyback provision, which allows eligible borrowers to "buy back" certain past periods of deferment or forbearance to make them count toward their 120-payment total.

Other Forgiveness and Discharge Programs

MOHELA also handles applications for several other types of loan discharge:

• Teacher Loan Forgiveness: Provides up to $17,500 in forgiveness for eligible teachers who work for five consecutive years in a low-income school.
• Total and Permanent Disability (TPD) Discharge: For borrowers who are unable to work due to a total and permanent disability.
• Closed School Discharge: If your school closed while you were enrolled or shortly after you withdrew.
• Borrower Defense to Repayment: If your school misled you or engaged in other misconduct.
• False Certification Discharge: If your school improperly certified your eligibility for a loan.

Widespread Servicing Issues: A Record of Borrower Complaints and Lawsuits

The challenges faced by borrowers with MOHELA are not merely anecdotal. Evidence from government watchdogs, consumer advocacy groups, and legal actions paints a picture of a servicer beset by systemic failures.

Systemic Failures in Government Reports

Independent government reports have been scathing in their assessment of MOHELA's performance. The annual reports from the Consumer Financial Protection Bureau (CFPB) and the Federal Student Aid (FSA) Ombudsman have highlighted a shocking range of errors.

MOHELA is the subject of a vastly disproportionate number of borrower complaints. In fiscal year 2023, the CFPB received a record 13,524 student loan complaints, with MOHELA being the most-complained-about federal servicer. While MOHELA services about 18% of borrowers in IDR plans, it was the subject of 52% of all complaints related to those plans.

Key Allegations and Borrower Experiences

Complaints against MOHELA fall into several consistent categories:

• Billing and Payment Errors: In October 2023, MOHELA failed to send timely billing statements to 2.5 million borrowers, causing 800,000 people to become delinquent on their loans.
• Processing Failures: Borrowers consistently report that MOHELA loses paperwork, misplaces payment histories, and fails to process applications for IDR and forgiveness programs in a timely manner.
• Misinformation and "Call Deflection": Internal MOHELA documents revealed an explicit strategy to "deflect" borrowers away from customer service call centers toward "self-help" options on its website, even for complex issues that require speaking to a person.

Major Lawsuits and Regulatory Actions

The widespread harm caused by these failures has led to significant legal and regulatory consequences for MOHELA.

• American Federation of Teachers (AFT) Lawsuit: In July 2024, the AFT filed a major lawsuit against MOHELA, alleging a pattern of illegal practices, including systematically overcharging borrowers and implementing the "call deflection" scheme.
• Project on Predatory Student Lending (PPSL) Lawsuit: In Maldonado v. MOHELA, the company is accused of failing to process legally mandated loan discharges for thousands of borrowers who attended fraudulent for-profit colleges.
• Regulatory Penalties: In response to the massive billing failure, the Department of Education withheld $7.2 million in payments from MOHELA for failing to meet its basic contractual obligations.

Resolving Disputes and Protecting Your Financial Health

When you encounter an error with MOHELA, there is a clear, escalating pathway for dispute resolution. Following these steps methodically creates a paper trail to protect your rights.

Step 1: Document Everything and Contact MOHELA's Internal Advocacy Team

Your first step should always be to try and resolve the issue directly with MOHELA, but you must do so strategically.

• Document Everything: From the very first interaction, keep meticulous records. For every phone call, note the date, time, the representative's name, and a reference number. Save all emails and download all correspondence from your online portal.
• Contact the Customer Advocacy Team: If standard customer service cannot help, ask to have your case escalated to MOHELA's Customer Advocacy Team. This is a specialized internal group designed to handle more complex disputes.

Step 2: File a Formal Complaint with the Consumer Financial Protection Bureau (CFPB)

If MOHELA fails to resolve your issue, your next step is to file a formal complaint with the CFPB. The CFPB is a federal agency that has authority over student loan servicers. You can submit a complaint online at the CFPB's website. The CFPB forwards your complaint to MOHELA and requires a formal, written response, typically within 15 days. Many borrowers report that this step finally prompts a resolution.

Step 3: Escalate Your Issue to the FSA Ombudsman Group

If your complaint remains unresolved, your final administrative appeal is to the Federal Student Aid (FSA) Ombudsman Group. This group is a neutral, confidential resource within the U.S. Department of Education that helps resolve disputes between borrowers and servicers. The Ombudsman acts as an impartial mediator to research the problem and help identify options for resolution.

• Contact Information:
• Online: Submit a case through the Federal Student Aid Feedback Center.
• Phone: 1-877-557-2575
• Mail: U.S. Department of Education, FSA Ombudsman Group, P.O. Box 1854, Monticello, KY 42633.  

Proactive Steps to Safeguard Your Account

Given the documented issues, it is wise for all MOHELA borrowers to be proactive.

• Keep Your Own Records: Do not rely on MOHELA to be the sole keeper of your financial history. Regularly download your complete payment history and all documents from your inbox and save them to a personal device.
• Use Digital Communication: Enroll in paperless correspondence and use the secure messaging system for important questions to create an automatic, time-stamped record.
• Beware of Scams: Be vigilant against debt relief scams. Any assistance you need can be done for free directly through MOHELA or StudentAid.gov. Never give your FSA ID or password to anyone.

Frequently Asked Questions