Landmark Complaint Outlines Pattern and Practice of Illegal Overcharging, Incompetence and Ongoing ‘Call Deflection’ Doom Loop
WASHINGTON—Today, the AFT filed agroundbreaking consumer protection lawsuit against the Higher Education Loan Authority of the State of Missouri, known as MOHELA, the giant student loan servicing company under fire for mismanaging student loan accounts for millions of people. The AFT is represented by the Student Borrower Protection Center, the National Consumer Law Center and Selendy Gay PLLC.
In the lawsuit, the AFT alleges that MOHELA illegally overcharged borrowers on their monthly student loan bills, failed to timely process paperwork and actively misled borrowers about their student loan accounts. These illegal practices could expose MOHELA to billions of dollars in liability because these practices may violate a range of federal and state laws.
Today’s lawsuit explains that MOHELA makes it practically impossible for all 8 million MOHELA borrowers to obtain assistance with their loans and to correct the account errors and misinformation that MOHELA itself creates. 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. Since 2011, the Department of Education has paid MOHELA more than $1.1 billion to staff call centers and provide help to borrowers with questions—work that MOHELA systemically failed to do.
A copy of the lawsuit filed in AFT v. MOHELA is available here:
https://protectborrowers.org/mohela-lawsuit/
A fact sheet outlining the specific claims brought by the AFT against MOHELA is available here:
https://protectborrowers.org/mohela-factsheet/
“MOHELA was hired by the federal government to help borrowers pay down debt, but instead it hung them out to dry to line its own pockets,” said AFT President Randi Weingarten. “Rather than fulfill its responsibilities, MOHELA has abdicated and deflected them—and it’s well past time it is held to account.
“MOHELA started promisingly but soon began to mimic the callous practices of its disgraced forerunner Navient: incompetence, malfeasance and blatant disregard for borrowers’ rights. The law prohibits unfair and deceptive trade practices, and our complaint outlines in detail how our members were harmed and their dreams deferred. We have their backs and our partners’ backs as we pursue this complaint to ensure justice and fairness, not illegality, prevails.”
This lawsuit builds on the findings in “The MOHELA Papers,” an investigation published by the AFT and the SBPC earlier this year that first uncovered MOHELA’s “call deflection” scheme.
“It is old news that MOHELA is bad at its job. Today’s lawsuit shows that when MOHELA fails student loan borrowers, the company is violating consumer protection law,” said SBPC Legal Director Winston Berkman-Breen. “Every borrower in the country has the right to servicing free from unfair and deceptive conduct. Each time MOHELA sends an inaccurate bill, gives wrong advice, or catches a borrower in a customer service doom loop, it violates those rights. Today, on behalf of the AFT, we’re asking the court to recognize these rights. MOHELA can no longer profit at borrowers’ expense.”
“MOHELA is paid billions to service federal student loan accounts and help borrowers manage their loans, but since payments resumed last fall it has failed spectacularly—and borrowers have paid the price,” said Alpha Taylor, staff attorney at the NCLC. “MOHELA has engaged in unlawful servicing conduct that has caused financial harm to borrowers, delayed their path to loan forgiveness, misguided them about their repayment options, and left borrowers on hold for hours. Borrowers cannot stay on hold any longer. MOHELA must be held accountable for its unlawful practices.”
MOHELA’s servicing failures are not merely nuisances, they are illegal. The lawsuit is brought under the District of Columbia’s Consumer Protection Procedures Act, which prohibits unfair or deceptive trade practices, and seeks to stop MOHELA from continuing its harmful servicing practices.
The AFT sued MOHELA under the D.C. Consumer Protection Procedures Act on behalf of its members and the public. The lawsuit alleges that, due to MOHELA’s unlawful servicing practices, including its ongoing call deflection scheme, the AFT has been forced to provide additional support for AFT members who owe student debt—conducting “debt clinics,” hiring a vendor to provide loan counseling, and investigating and exposing MOHELA’s abuses in partnership with the SBPC.
In response to the lawsuit, the AFT, the SBPC, the NCLC and Selendy Gay call on regulators, state attorneys general and private litigants to continue to enforce consumer protection laws to protect all student loan borrowers across the country from unfair and illegal student loan servicing.
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About the Student Borrower Protection Center
TheStudent Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
Learn more atprotectborrowers.org or follow SBPC on X (formerly Twitter) @theSBPC.
About the National Consumer Law Center
Since 1969, the nonprofitNational Consumer Law Center® has worked for economic justice for low-income and other disadvantaged people in the U.S. through policy analysis and advocacy, publications, litigation and training. The NCLC’sStudent Loan Borrower Assistance Project provides information about student loan rights and responsibilities for borrowers and advocates. We also seek to increase public understanding of student lending issues and to identify policy solutions to promote access to education, lessen student debt burdens, and make loan repayment more manageable.
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The AFT represents 1.8 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.
