ST. LOUIS 鈥 Borrowers across the country say they鈥檙e being forced to pay on federal student loans that should be forgiven due to the inaction and negligence of a Chesterfield-based loan servicer, according to a class-action lawsuit filed this week.
People across the U.S. say the Missouri Higher Education Loan Authority, or MOHELA, takes hours to answer phone calls and has failed for over a year to make progress on loan forgiveness applications. The result is that people who took jobs in the public sector 10 years ago with the promise of federal loan forgiveness are still making payments while their loans accrue interest.
Borrowers are now demanding MOHELA pay more than $5 million in damages.
鈥淣ow that these individuals have fulfilled their obligations, they should receive the benefits promised by the (public loan forgiveness program),鈥 said Joseph Kenney, a partner at the Pennsylvania law firm Sauder Schelkopf, who filed suit Monday. 鈥淚nstead, due to no fault or their own, they are now being forced to make extra loan payments.鈥
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An unnamed representative for MOHELA said the agency had not yet been served with the lawsuit but noted it does not have the authority to update payments or forgive loans.
The filing comes amid an unprecedented surge in loan repayments after a three-year pandemic hiatus that left servicers like MOHELA struggling to keep up with customer service demands. In October, the it would penalize MOHELA for failing to send 2.5 million borrowers their billing statements on time.
The Public Student Loan Forgiveness program was passed in 2007 in an effort to encourage college graduates to take lower-paying public service jobs. It allowed people to have the remainder of their loan balance erased after making 120 regular payments.
In 2020 during an economic downturn caused by the COVID-19 pandemic, federal officials froze student loan payments to allow borrowers some relief.
At the same time, many loans switched servicers. Federal officials received complaints from borrowers about poor customer service and concerns from servicers that they couldn鈥檛 ramp up staffing in time for payments to resume.
MOHELA, a college loan agency created by Missouri law that has grown to service loans across the country, continued to take on more accounts. In 2022, it became the servicer for the public student loan program and earned $68.7 million in fees, according to the lawsuit. Its operating revenues increased from $114.7 million in fiscal year 2022 to $358.6 million in 2023.
But customer service problems persisted. In September, a group of six U.S. senators sent a letter to MOHELA expressing 鈥渟evere concerns鈥 from borrowers, who reported they hadn鈥檛 received credit for all of the payments they had made to qualify for the public loan forgiveness and had seen 鈥渓ong wait times鈥 when trying to contact the nonprofit鈥檚 representatives.
Borrowers filed more than 3,200 complaints with the federal Consumer Finance Protection Bureau about MOHELA between Dec. 15, 2022, and Nov. 28 of this year, the lawsuit says. People complained about not being able to get in touch with anyone at the servicer and not being credited for previous payments.
鈥淐ustomer service continues to be absolutely awful,鈥 one borrower wrote in a complaint attached to the lawsuit. 鈥淗onestly, it鈥檚 amazing they are (allowed) to manage anything when they can鈥檛 manage a paper bag.鈥
On Monday, two borrowers 鈥 Jennifer Joy, of Colorado, and Misty Thomas, of Florida 鈥 filed a class-action suit in St. 亚洲无码 federal court on behalf of themselves and potentially scores of others who have been impacted by the problems at MOHELA.
They are alleging violations of Colorado and Florida consumer protection laws, as well as breach of contract, negligence, breach of fiduciary duty and violations of federal debt collections laws.
鈥淏ut for MOHELA鈥檚 wrongful and negligent breaches of their duties of care, plaintiffs and the class would not have suffered the harm alleged herein,鈥 the suit says.
A hearing has not yet been set in the case.