Over 1.3 Million Borrowers Affected by Student Loan Billing and Notice Errors, U.S. Education Department Penalizes MOHELA

Student loan servicer MOHELA sanctioned for failure to send timely billing statements to 2.5 million borrowers, resulting in over 830,000 late payments. Further errors across various servicers have incorrectly billed or wrongfully penalized borrowers, exposing significant issues with the student loan system during the return to repayments.

Amid difficulties with the return to student loan repayments after a pandemic pause, over 1.3 million borrowers have faced billing errors due to issues with various servicers, particularly MOHELA, which was late in sending out billing notices to 2.5 million borrowers causing 830,000 late payments.
The U.S. Department of Education has penalized MOHELA and withheld $7.3 million in revenue due to these delayed notices, as MOHELA failed to meet the requirement of providing at least 21 days' notice before payment was due.
Beyond the issues with MOHELA, another 21,000 borrowers have received incorrect loan bills since repayments resumed, and 16,000 borrowers erroneously received bills although their debts are supposed to be canceled due to fraudulent activities of their colleges.
There are ongoing concerns about the long wait times and incorrect information provided by customer service representatives when borrowers attempt to rectify account mistakes. The situation has been characterized as a 'system restart' issue and has been anticipated by both Democrat and Republican parties.
Borrowers impacted by these errors have been placed on forbearance by the Department of Education until the issues are resolved, meaning they will not have to pay their bills and interest on their loans will not accrue.