- The American Federation of Teachers has amended its lawsuit against MOHELA, alleging ongoing and systemic failure to service student loans that continues to harm borrowers.
- New federal data included in the complaint shows that MOHELA has the longest call wait times and highest rate of abandoned calls among major federal loan servicers.
- Borrowers reported billing errors, delayed forgiveness, non-refunds, and prolonged financial stress.
The American Federation of Teachers is escalating its legal fight against one of the nation’s largest student loan servicers, arguing that borrowers’ conditions have not improved (and may have worsened) since the lawsuit was first filed last summer.
On January 15, the Union I filed an amended complaint (PDF) v. Missouri Higher Education Loan Authority, known as MOHELA, in federal court in Washington, D.C. The revised filing expands on previous allegations that MOHELA violated the Consumer Protection Act by failing to provide basic loan servicing functions, including accurate billing, timely processing of repayment and forgiveness requests, and meaningful access to customer service.
The amended complaint also presents new federal government performance data comparing student loan servicers — data that, according to the filing, places MOHELA at the bottom of the customer service pack.
According to the most recent student loan statistics, MOHELA is the fourth largest loan servicer 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 illegal practices in violation of the District of Columbia Consumer Protection Procedure Act. The amended complaint says MOHELA’s problems were not isolated pandemic-era failures but instead reflect ongoing business decisions that prioritize cost-cutting and growth over borrower support.
According to the filing, the Department of Education has paid MOHELA more than $1.1 billion since 2011 to service federal student loans. Today, MOHELA serves more than seven million borrower accounts nationwide, including a disproportionate share of borrowers seeking public service loan forgiveness.
The amended complaint alleges that MOHELA continued:
- Failure to submit accurate and timely billing data
- He miscalculated the income-driven repayment amounts
- Delaying or mishandling requests for forgiveness programs such as PSLF
- Borrowers are not required to collect payments
- Failed to issue refunds owed to borrowers
- Providing inaccurate or misleading information about borrowers’ choices
- Make it extremely difficult for borrowers to reach a live customer service representative
The AFT argues that these failures have tangible financial consequences for borrowers, including unnecessary payments, forgone forgiveness credit, damaged credit standing, and long-term debt burdens.
New data highlights customer service breakdowns
One of the most striking additions to the amended complaint is new federal data comparing how long borrowers wait to speak with customer service representatives at different loan servicers.
According to the Department of Education’s loan servicing performance metrics included in the filing, MOHELA borrowers wait about seven times longer than borrowers served by EdFinancial to speak with a representative. Compared to borrowers on Aidvantage, CRI, and Nelnet, MOHELA borrowers wait 50 times longer.
Call abandonment rates tell a similar story. While no other major federal loan servicer sees more than 5 percent of callers hang up before reaching a representative, MOHELA’s abandonment rate exceeds 14 percent—nearly three times higher.
The amended complaint says these numbers are not incidental. Instead, it alleges, MOHELA intentionally relies on “call diversion” strategies (directing 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 does this affect student loan borrowers?
Student loan servicers are the primary point of contact for federal borrowers. They send invoices, process payments, calculate payment plans, and track progress toward forgiveness. When servicers fail, borrowers often have nowhere else to turn.
The amended complaint includes detailed examples of borrowers who:
- They made payments that were never credited to their accounts
- Continue paying after telling them they will get a refund
- They are put into tolerance incorrectly, and remission is delayed
- There has been incorrect information regarding the deadlines for income-based repayment re-certification
- Missed months of payments qualify for Public Service Loan Forgiveness
For PSLF borrowers (teachers, nurses, first responders, and other public employees), servicing errors can be especially costly. A single incorrectly applied payment or unnecessary forbearance can delay loan cancellation by months or even years.
The AFT argues that these issues persist even as changes in federal policy have made accurate service delivery more important than ever, including repayment, income-based repayment adjustments, and ongoing litigation affecting repayment plans.
What Borrowers Can Do Now
The case comes at a time when millions of borrowers are navigating the repayment process after years of pandemic-era turmoil, changing 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 argues 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 the D.C. Consumer Protection Law.
The lawsuit does not immediately change the borrowers’ obligations or erase the debt. Court cases can take years, and their outcomes are uncertain. However, the amended complaint highlights issues that borrowers should monitor closely.
Borrowers with loans offered by MOHELA may want to:
- Maintain detailed records of payments, billing data, and communications
- Save screenshots or PDF files of account records and correspondence
- Double-check that the payments are added correctly
- Monitor progress towards tolerance programmes
- Escalate unresolved issues through the Office of the Federal Student Aid Ombudsman or the Consumer Financial Protection Bureau
Borrowers who encounter errors may also benefit from filing formal complaints with their state’s attorneys general, which can help document systemic problems and stimulate additional oversight.
Whether the lawsuit is successful, and whether it results in lasting changes for borrowers, will be closely monitored across the student loan system.
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