Inside Elizabeth Warren’s crusade against the company that foiled Biden’s student debt relief plan
By Michael Jones
President Joe Biden kicked off the week in Wisconsin by announcing new plans to cancel student debt for tens of millions of Americans that build on the nearly $150 billion in relief his administration has already approved for four million borrowers.
The announcement is the latest step of a piecemeal approach to student loan debt relief the president pivoted to last summer immediately after the Supreme Court struck down his plan to cancel at least $10,000 of student loan debt for borrowers earning up to $125,000—with another $10,000 in relief for Pell Grant recipients.
At the center of the case against the original Biden plan was the Missouri Higher Education Loan Authority, a state-created loan servicing corporation known as MOHELA. During a Wednesday afternoon hearing, the servicer found itself in the crosshairs of Sen. Elizabeth Warren (D-Mass.) as she took it to task for the servicer’s mismanagement of a George W. Bush-era loan forgiveness program.
Warren—one of most vocal proponents for student debt cancellation on Capitol Hill and the chair of the Senate Banking subcommittee that held the hearing—told me ahead of it that the goal was to document the consequences of MOHELA’s failure and discuss ways Congress can produce accountability for borrowers.
“The Biden administration is doing everything they can to make the student loan program work for people across the country. MOHELA collects millions and millions of dollars to administer a big part of that program. And they’re doing a terrible job.”
Warren’s criticism honed in on the real-life consequences of MOHELA’s mismanagement.
For example, the failure to send timely billing statements to 2.5 million borrowers, a mishap that resulted in the Education Department withholding more than $7 million in payments to the servicer, is not just a bureaucratic blunder. It’s a direct hit on the financial stability of these borrowers.
Additionally, the poor customer service, which led to a call abandonment rate of 35 percent, is not just a statistic. It’s a frustrating experience for those seeking help.
And the teachers, nurses, service members, and firefighters who were prevented from accessing the relief they were owed under Public Service Loan Forgiveness—the law mentioned above Bush signed in 2007 that discharged student loan balances after 120 qualifying monthly payments for eligible professionals— aren’t just names. They’re real people, struggling under the weight of their student loan debt.
MOHELA CEO Scott Giles declined Warren’s invitation to testify at the hearing.
“Think about that: His company gets paid hundreds of millions of taxpayer dollars to administer a federal program. It’s a mess, and, instead of answering for his failures, Giles goes into hiding,” Warren said during a scathing opening statement during the hearing. “I don’t understand why MOHELA should be let within 10,000 feet of a student loan program. And I think it’s long past time that the Department of Education hold MOHELA accountable for its failures.”
Why it matters:
Rep. Cori Bush (D-Mo.), an advocate for student loan debt cancellation and outspoken MOHELA critic, agreed.
“No company should be profiting from the student debt crisis, especially MOHELA with their dubious record of customer service in the past,” she said in a statement to me. “We have a $2 trillion student debt crisis in this country and the president is using his authority to respond to this crisis. My office will continue our work to hold student loan servicers accountable for their harm to our communities and hold MOHELA accountable for their part in that harm.”
Democratic lawmakers argue that MOHELA’s failure to sufficiently support borrowers reflects a decades-long pattern of student loan incompetence and misconduct that has affected millions of borrowers nationwide. A report released ahead of the hearing by Warren and Sens. Richard Blumenthal (D-Conn.), Ed Markey (D-Mass.) and Chris Van Hollen (D-Md.) revealed MOHELA and three of their loan servicers—EdFinancial, Maximus, and Nelnet—made almost four million billing errors during the return to repayment after the pandemic-era pause.
Data in the report exposed high call wait and email response times, with one servicer reporting a six-week average email response time. When borrowers called customer service, they endured call abandonment rates as high as 48.2 percent during the return to repayment. Overall, customer service ratings repeatedly fell below the Education Department’s required thresholds.
If MOHELA sounds familiar, there’s a reason: The company was at the center of one of the two Supreme Court cases that resulted in President Biden’s original cancelation plan being rejected. In his opinion overturning the plan, Chief Justice John Roberts held that MOHELA would suffer financial harm from being unable to collect interest on student loan debt.
“If it weren’t for MOHELA, 43 million borrowers might have gotten debt relief from President Biden,” Warren said.
Bush added that the fact that MOHELA sits at the center of Republicans’ efforts to block student debt relief adds salt to the wound caused by their mismanagement.
In an ideal world, Warren and congressional Democrats would have the votes to pass legislation canceling student loan debt. But with the Republican-controlled House and lack of GOP support to break a Senate filibuster, the reality is that oversight hearings like the one Warren led this week are one of the few effective ways to advance the Senate Democrats’ agenda.
“The laws have not changed since [former President] George W. Bush got the legislation through for Public Service Loan Forgiveness. But the way those laws were enforced offered almost no help to anyone,” Warren said. “So what President Biden has been doing is using the Department of Education to explore every opportunity to use current law to permit more debt relief. It’s our job in Congress to make sure that both the Department and the private contractors are following through. That’s what makes a real difference on the ground.”
Michael Jones is an independent Capitol Hill correspondent and contributor for COURIER. He is the author of Once Upon a Hill, a newsletter about Congressional politics.
