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A student-loan company at the center of a lawsuit blocking Biden’s debt cancellation with a ‘dubious record of customer service’ just got a new contract to keep servicing millions of borrowers, Cori Bush says

Rep. Cori BushFEBRUARY 28: Representative Cori Bush speaks as student loan borrowers and advocates gather for the People’s Rally To Cancel Student Debt During The Supreme Court Hearings On Student Debt Relief on February 28, 2023 in Washington, DC.

Jemal Countess/Getty Images for People’s Rally to Cancel Student Debt

  • The Education Department awarded five student-loan companies new contracts, including MOHELA.
  • MOHELA is at the center of a lawsuit seeking to permanently block Biden’s student-debt relief.
  • Rep. Cori Bush told Insider that MOHELA’s “dubious record of customer services” demands oversight.

Missouri Rep. Cori Bush wants to be sure a student-loan company central to a lawsuit blocking President Joe Biden’s student-loan forgiveness isn’t’ getting off easy.

Last week, the Education Department announced it awarded five student-loan companies — Central Research Inc, EdFinancial Services, Maximus Education, Nelnet, and MOHELA — new contracts to improve loan servicing over the next five years for 37 million federal borrowers. As the department noted in its press release, these new contracts are part of its larger plan to overhaul loan-servicing and implement “much-needed improvements to better serve borrowers,” like a new income-driven repayment plan.

MOHELA, however, has fallen under scrutiny over the past year, primarily because it is a main focus in a lawsuit filed by six Republican-led states at the end of last year that argued Biden’s broad student-debt relief would harm their states’ tax revenues, along with Missouri-based MOHELA’s revenue. Bush has long called for oversight over MOHELA, and she’s keeping it up — even after it renewed its contract.

“The Department of Education must take proactive steps to seamlessly transition borrowers to repayments starting in the coming months. My colleagues and I will be watching the implementation of these new rules closely, particularly for MOHELA, to ensure the Public Service Loan Forgiveness program is being administered in a timely and efficient manner,” Bush told Insider.

“No company should be profiting from the student debt crisis, especially MOHELA with their dubious record of customer service in the past,” she continued. “My office will continue our work to hold student loan servicers accountable for their harm to our communities. Ultimately, there is still much work to be done to provide student debt relief, bolster college affordability, and begin the transition to a world without student debt at all.”

After the six GOP-led states filed their lawsuit to block Biden’s plan to cancel up to $20,000 in student debt for federal borrowers, Bush wrote a letter to MOHELA CEO Scott Giles requesting information on the extent to which the company was involved in the lawsuit. MOHELA later responded to Bush and said it was not involved in the states’ decision to sue, but the states’ lawyers proceeded to argue on behalf of potential revenue losses MOHELA would suffer from Biden’s debt relief during Supreme Court oral arguments in February.

The liberal Supreme Court justices appeared skeptical of the states’ standing to involve MOHELA in their case, and a recent analysis from left-leaning think tank Roosevelt Institute and advocacy group Debt Collective, based on Freedom of Information Act requests, said that MOHELA actually would not suffer any financial harm from debt cancellation because it would still profit from managing PSLF. 

As Bush referenced, MOHELA is responsible for the whole PSLF portfolio, which forgives student debt for government and nonprofit workers after ten years of qualifying payments. The transition of millions of public servants’ accounts over to MOHELA has been far from seamless. A number of borrowers have previously told Insider that they have spent hours on the phone waiting to get simple questions answered from MOHELA regarding their payment status, leaving them in financial limbo.

To be sure, ensuring accountability over servicers and improving customer service largely depends on increased funding from Congress for the Federal Student Aid office. Biden’s budget requested $2.7 billion for Federal Student Aid — a $620 million increase over the 2023 spending level — to carry out all of the Education Department’s initiatives, an increase the department said is “essential to support students and student loan borrowers.”

“Students and their families deserve transparency and accountability from student loan servicers to ensure they can take advantage of the most affordable ways to repay their loans — and it’s critical that the Department of Education hold those servicers to the highest of standards,” Massachusetts Sen. Elizabeth Warren told Insider. “That’s why I’ll continue to fight for the increased funding the Student Aid Administration needs to provide quality services and support at-risk borrowers.”

Read the original article on Business Insider
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