Oct. 30 (UPI) — The Education Department said on Monday that it will penalize the Missouri Higher Education Loan Authority, or MOHELA, for sending out late billing statements that caused hundreds of thousands of borrowers to go delinquent.
The department said MOHELA failed to regularly send out the billings on time to 2.5 million borrowers, leading some 800,000 to become delinquent on their loans.
As a result, the department said it would withhold $7.2 million in payments to MOHELA this month and ordered it to place all affected borrowers in forbearance until the billing issue is resolved.
Any months those borrowers are in forbearance will count as credit toward loan forgiveness.
“Our oversight efforts have uncovered errors from loan servicers that will not be tolerated,” Education Secretary Miguel Cardona said in a statement. “We took immediate actions to protect borrowers from the fallout of this error and hold the responsible servicers accountable, including by withholding $7.2 million in payment from one servicer.”
Federal Student Aid Chief Operating Officer Rich Cordray said the department will adjust to zero any interest that affected borrows accrue and credit them with progress toward public service loan forgiveness and income-driven repayment.
“In strengthening our efforts to hold servicers accountable for errors that harm borrowers, the department will begin to withhold some funds under our monthly contracts to encourage stronger and more reliable service to borrowers,” Cordray said. “These accountability measures will help ensure that future borrowers are not harmed and servicers understand that there are consequences to their actions when they do not meet the terms of their contracts.”
