Student loan servicer MOHELA penalized for billing failures, leaving borrowers in a scramble

The U.S. Department of Education has penalized MOHELA, the largest federal student loan servicer, for failing to send timely billing statements to 2.5 million borrowers. As a result, over 800,000 borrowers missed their loan payments in October. The department will withhold $7.2 million in payment owed to MOHELA. This action comes amidst widespread reports of loan servicing errors, including borrowers being erroneously returned to repayment and experiencing incorrect payment calculations. The Education Department has instructed servicers to place affected borrowers into forbearance and has taken steps to address the mistakes. However, critics argue that the department shares responsibility for these failures and that more resources are needed to handle the influx of borrowers returning to the system.