Key Points
- The American Federation of Teachers has amended its lawsuit against MOHELA, alleging ongoing and systemic student loan servicing failures that continue to harm borrowers.
- New federal data included in the complaint shows MOHELA has the longest call wait times and the highest rate of abandoned calls among major federal loan servicers.
- Borrowers have reported billing errors, delayed forgiveness, missing refunds, and prolonged financial stress.
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.
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.
According to the latest student loan statistics, MOHELA is the 4th largest loan servicer by number of borrowers serviced - with 7.23 million borrowers.
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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 were not isolated pandemic-era failures but instead reflect ongoing business decisions that prioritize cost-cutting and growth over borrower support.
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.
The amended complaint alleges that MOHELA has continued to:
- 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.
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 loan servicer performance metrics 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.
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 centers 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.
The amended complaint includes detailed examples of borrowers who:
- 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 underscores 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.
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.
Whether the lawsuit succeeds, and whether it leads to lasting changes for borrowers, will be closely watched across the student loan system.
Frequently Asked Questions
What is the MOHELA lawsuit about?
It’s a federal lawsuit alleging that MOHELA has repeatedly failed to properly service federal student loans. 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.
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 canceled?
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 of your specific debt depends on separate federal programs and eligibility.
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 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 rights do I have as a MOHELA borrower if my loans are being serviced improperly?
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.
Where can I get help if I’m struggling with MOHELA or my student loan payments?
You can seek help from:
- Federal Student Aid (FSA) contact centers.
- Federal Student Aid Ombudsman Group for dispute resolution.
- Consumer Financial Protection Bureau (CFPB) to file servicing complaints.
- Student loan counseling organizations for repayment or forgiveness guidance.
If you want direct assistance, these official channels are often more effective than going through social media or informal forums.
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Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.