Key Points
- The Department of Education will transfer some federal student loans from MOHELA to other servicers later this year.
- This will include PSLF borrowers, who previously had to use MOHELA.
- Officials say the move aims to improve customer service, but past transfers have often created confusion and errors.
The Department of Education has confirmed that it will transfer an unspecified number of student loan accounts away from the Missouri Higher Education Loan Authority, better known as MOHELA, by the end of the year. This was revealed in a letter to Senator Elizabeth Warren (PDF File), who was asking for information from the Department of Education about the current status of repayment and forgiveness programs.
While the department has not provided details about how many accounts will move or which servicers will take them, officials did say that this will include some of the PSLF portfolio. “FSA is prioritizing efforts to improve customer service,” Sarah Ursprung, Acting Assistant Secretary for Legislation and Congressional Affairs, wrote in a letter to Senator Elizabeth Warren.
For borrowers, the news brings both relief and apprehension. A change in servicer might resolve long-standing frustrations, but the process of transferring accounts has often been messy in the past.
Would you like to save this?
We’ll email this article to you, so you can come back to it later!
@thecollegeinvestor Student loans at MOHELA will be transferring to other loan servicers in the coming months. How many? We don’t know. But this is common and happens all the time. #studentloans #studentloandebt ♬ original sound – The College Investor
Why MOHELA Is Losing Accounts
MOHELA has been the target of intense scrutiny in recent years. The company has draw particular criticism for its management of the Public Service Loan Forgiveness program, before those functions were shifted directly to FSA.
Senator Warren has been among the loudest critics, calling MOHELA’s performance “atrocious” compared to other servicers. According to her office, borrowers waited seven times longer to reach a representative than they did with the second-worst servicer in late 2024.
MOHELA has denied allegations of poor service. A spokesperson said the company has always acted in borrowers’ best interests and is committed to supporting them as they navigate repayment. Department officials have also said its performance in recent months has shown improvement.
Still, the decision to reassign some accounts signals that the department is not satisfied. By spreading MOHELA’s workload across other loan servicers such as Nelnet, Aidvantage, CRI or EdFinancial, federal officials hope to ease pressure on the contractor and reduce borrower complaints.
Furthermore, with the Department of Education internalizing the PSLF process, it no longer needs to rely on one loan servicer to handle PSLF borrowers.
What Student Loan Borrowers Should Expect
Loan transfers are not new. The Department of Education has regularly reassigned accounts when contracts expire or when one servicer becomes overloaded. But history shows the process can create new challenges.
In recent years, borrowers have seen both FedLoan Servicing and Navient leave the industry, meaning millions of loan accounts were transferred to other borrowers.
According to a 2022 report from the Consumer Financial Protection Bureau (PDF File), poor data transfers have led to lost records, inaccurate billing, and even setbacks in progress toward loan forgiveness. Borrowers may find that payment histories need to be corrected or that automatic payments fail to carry over.
Officials say they intend to avoid those problems this time. The Department of Education noted in their letter that the transfer “will be done thoughtfully and in a responsible way that avoids negative impacts to borrowers.”
In light of the upcoming changes, borrowers should do the following:
- Update contact information on both MOHELA’s system and StudentAid.gov to ensure notices reach you.
- Download records, including payment histories and correspondence, before the transfer.
- Watch for transfer notices from both MOHELA and the new servicer.
- Re-establish auto-debit or bill pay with the new company once the transfer is complete.
Being proactive can reduce the risk of disruptions during the handoff.
What Happens Next
This move is part of a broader recalibration of the student loan system – which will see many more changes in the coming months.
Over the past several years, the Department of Education has brought functions such as Public Service Loan Forgiveness in-house, reducing reliance on servicers for complex forgiveness programs. Still, the day-to-day administration of payments, repayment plans, and deferments remains in the hands of contractors.
It’s important to understand that moving accounts around may not address systemic problems in loan servicing. For now, though, the transfer away from MOHELA represents a visible acknowledgment of the frustrations voiced by many borrowers.
However, the borrower impact will come down to execution. If handled well, the move could smooth repayment for thousands of borrowers. If not, it risks adding another layer of problems to an already messy system.
Don’t Miss These Other Stories:
The post Student Loan Servicer Changes Coming Soon appeared first on The College Investor.
