- The American Federation of Teachers has amended its lawsuit against MOHELA, alleging persistent and systematic student loan repayment failures that continue to harm borrowers.
- New federal data in the complaint shows that MOHELA has the longest call wait times and the highest call abandonment rate among major federal loan servicers.
- Borrowers have reported billing errors, delayed forgiveness, missed repayments and prolonged financial stress.
The American Federation of Teachers is escalating its legal battle against one of the nation’s largest student loan servicers, arguing that conditions for borrowers have not improved (and may even 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, commonly known as MOHELA, in federal court in Washington, DC. The revised filing builds on previous allegations that MOHELA violated consumer protection laws by failing to provide basic loan processing 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, puts MOHELA at the bottom of the list for customer service.
According to the latest student loan statistics, MOHELA is the fourth largest lender by number of borrowers served – with 7.23 million borrowers.
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 savings and growth over borrower relief.
According to the filing, the Department of Education has paid MOHELA more than $1.1 billion to pay off federal student loans since 2011. Today, MOHELA serves more than seven million borrower accounts nationwide, including a disproportionate share of borrowers seeking federal loan forgiveness.
The amended complaint alleges that MOHELA has continued to:
- Failure to send invoice statements on time or correctly
- Incorrect calculation of income-related repayment amounts
- Delaying or mishandling applications for forgiveness programs like PSLF
- Collecting payments that borrowers did not have to make
- Failure to make repayments due to borrowers
- Provide inaccurate or misleading information about borrowers’ options
- Make it extremely difficult for borrowers to reach a live customer service representative
The AFT states that these failures have real financial consequences for borrowers, including unnecessary payments, missed forgivable loans, damaged credit and long-term debt burdens.
New data highlights customer service failures
One of the most notable additions to the amended complaint is new federal data comparing how long borrowers wait to speak with customer service representatives from different loan servicers.
According to Department of Education performance statistics cited in the filing, MOHELA borrowers wait approximately seven times longer than borrowers assisted by EdFinancial to speak with a representative. Compared to borrowers at Aidvantage, CRI and Nelnet, MOHELA borrowers wait more than 50 times as long.
The abandonment rate tells a similar story. While no other major lender sees more than 5 percent of callers hang up before reaching a representative, MOHELA’s abandonment rate is above 14 percent – almost three times higher.
The amended complaint states that these figures are not coincidental. Instead, it is alleged that MOHELA deliberately relies on ‘call deflection’ strategies (redirecting borrowers to automated systems, websites or self-service tools) rather than adequately staffing call centers.
For borrowers, this can mean hours on hold, dropped calls, unanswered messages and unresolved account errors.
How this affects 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 provides detailed examples of borrowers who:
- Made payments that were never credited to their accounts
- Continued to pay after being told they would receive a refund
- Were wrongly placed in forbearance, delaying forgiveness
- Were misinformed about the deadlines for recertification of income-related reimbursements
- Lost months of eligible payments for Public Service Loan Forgiveness
For borrowers pursuing PSLF (teachers, nurses, first responders and other public servants), servicing errors can be particularly costly. A single misapplied payment or unnecessary deferral can delay a loan cancellation by months or even years.
The AFT states that these problems persist even as federal policy changes have made accurate service delivery more important than ever, including restarting reimbursements, income-based adjustments to reimbursements, and ongoing litigation affecting reimbursement plans.
What borrowers can do now
The case comes at a time when millions of borrowers are grappling with repayments after years of pandemic-era disruptions, shifting repayment plans and legal challenges to student loan relief programs. Accurate service and accessible customer support are essential for borrowers to make informed financial decisions.
The AFT states 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 in MOHELA’s practices under DC consumer protection law.
The lawsuit does not immediately change the borrowers’ obligations or immediately erase the debts. Lawsuits can take years and the outcomes are uncertain. Still, the amended complaint highlights the issues that borrowers should pay close attention to.
Borrowers with MOHELA loans may want to:
- Keep detailed records of payments, billing statements and communications
- Save screenshots or PDFs of account history and correspondence
- Double check that payments are being credited correctly
- Keep an eye on progress toward forgiveness programs
- Escalate unresolved issues through the Federal Student Aid Ombudsman or the Consumer Financial Protection Bureau
Borrowers who experience errors may also benefit from filing formal complaints with their own attorney general, which can help document systemic problems and lead to additional oversight.
Whether the lawsuit succeeds, and whether it leads to lasting changes for borrowers, will be closely watched across the student loan system.
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