Sun. Mar 16th, 2025

The Higher Education Loan Authority of the State of Missouri (MOHELA)’s Columbia operating center, as photographed Feb. 28 (Annelise Hanshaw/Missouri Independent).

A federal lawsuit filed Monday accuses a quasi-governmental organization based in Missouri of illegally overcharging and actively misleading student loan borrowers.

The American Federation of Teachers filed the lawsuit in U.S. District Court in Washington D.C. against the Missouri Higher Education Loan Authority, better known as MOHELA. The lawsuit claims the student loan servicer illegally deducted payments from borrowers’ bank accounts without consent, misinformed borrowers about paperwork deadlines, failed to timely process application for loan relief and a litany of other allegedly unlawful activity. 

Similar accusations have been made against MOHELA in lawsuits filed in Missouri, as well as in a report released in February by the teacher’s union.

“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,” AFT President Randi Weingarten said in a press release announcing the lawsuit. “Rather than fulfill its responsibilities, MOHELA has abdicated and deflected them — and it’s well past time it’s held to account.”

MOHELA faces accusations it mismanaged federal student loan forgiveness program

A spokesperson for the Chesterfield-based company did not immediately respond to a request for comment about the lawsuit. It has previously argued that the U.S. Department of Education is partially to blame for the issues highlighted by critics, and called the AFT’s February report a “PR campaign.” 

In May, a group of advocates and progressive Democratic lawmakers called on the U.S. Department of Education to end its contract with MOHELA, accusing it of being a predatory loan service and failing student borrowers.

Monday’s lawsuit claims that “individually, any one of MOHELA’s failings would be sufficient to cause financial, mental and emotional distress.”

“Collectively, they result in a Kafkaesque experience and make it practically impossible for borrowers to correct account errors, make important decisions to protect their economic well-being, or even confirm basic information about their student loans.”

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