The U.S. Department of Education has announced that it decided to withhold $7.2 million from the Higher Education Loan Authority of the State of Missouri (MOHELA), the largest federal student loan servicer, due to its failure to send on-time billing statements to 2.5 million borrowers. The department cited gross servicing failures and reports of widespread loan servicing errors. MOHELA’s errors, including sending incorrect billing statements and returning defrauded borrowers to repayment instead of placing them in forbearance, led to punitive action. The department instructed servicers to place affected borrowers in forbearance, zero out accrued interest, and count forbearance time toward Public Service Loan Forgiveness. The move comes amid increased complexities in the student loan system and surging borrower numbers returning to repayment, causing longer call wait times and greater challenges for servicers.
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