Teachers’ union files consumer protection lawsuit against Missouri student loan servicer

The American Federation of Teachers (AFT) filed a consumer protection lawsuit against The Higher Education Loan Authority of the State of Missouri (MOHELA) in federal court earlier this week. 

The suit was filed in the Superior Court of the District of Columbia and AFT is asking for a jury trial. 

AFT claims that MOHELA overcharged borrowers on their monthly bills, failed to send bills on time to millions of borrowers, failed to process applications in a timely manner for Public Service Loan Forgiveness and Income-Driven Repayment Plans and did not issue refunds or communicate promptly with borrowers. 

“MOHELA unfairly and systematically ‘deflected’ millions of borrowers, including teachers, nurses and other AFT members who needed help with their student loans, away from call centers and toward websites and other ‘self-help’ options that failed to address these borrowers’ issues,” AFT wrote in a statement. “Since 2011, the Department of Education has paid MOHELA more than $1.1 billion dollars to staff call centers and provide help to borrowers with questions — work that MOHELA systemically failed to do.” 

In a statement to Missouri Lawyers Media, MOHELA disputed the claims. 

“Providing support to student loan borrowers is the utmost priority to MOHELA and any claims to the contrary are false. MOHELA will vigorously defend against the allegations in the complaint,” MOHELA said in a statement. 

Several of the issues highlighted in AFT’s lawsuit took place in 2023, a year that saw record growth for MOHELA and numerous issues for borrowers. Over three years from FY 2021-FY2024 MOHELA tripled its assets and growth but failed to provide adequate service to its current borrowers, according to AFT. 

MOHELA pushed back on the claim, saying it facilitated millions of customer service calls and assisted millions of borrowers. 

“In 2023, on behalf of FSA, MOHELA helped 6 million borrowers enter repayment, facilitated over 3.1 million customer service calls,” according to MOHELA’s statement. “Through April 2024, MOHELA also served as interim Public Service Loan Forgiveness servicer and processed the largest amount of forgiveness — nearly $55 billion for 737,000 individual borrowers — by any FSA contractor in the history of the program.” 

AFT points to 10 unlawful servicing practices in the lawsuit. These include allegations that MOHELA illegally deducted payments from borrowers’ bank accounts, failed to send bills on time, sent inaccurate bills, misinformed borrowers about key deadlines and did not process borrowers’ PSLF applications accurately. 

MOHELA is using a “deflection scheme,” AFT alleges, to boost its bottom line by failing to adequately staff calling centers and by deflecting millions of calls regarding loan issues and mistakes.  

“On its own, each of these unlawful acts or practices causes financial hardship, confusion and stress for student loan borrowers. Taken together, these unlawful acts and practices demonstrate that MOHELA has failed to meet its basic obligations to handle student loan borrower accounts on behalf of the U.S. Department of Education,” AFT said in a statement.  

The case is American Federation of Teachers v. The Higher Education Loan Authority of the state of Missouri.