UNITED STATES – JUNE 25: Ranking member Sen. Elizabeth Warren, D-Mass., questions Federal Reserve Chairman Jerome Powell during the Senate Banking, Housing and Urban Affairs Committee hearing on Wednesday, June 25, 2025. Warren has been in communication with the Department of Education over proposed student loan servicing transfers from MOHELA to other contractors. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
CQ-Roll Call, Inc via Getty Images
The Department of Education will begin transferring an unknown number of federal student loans from MOHELA to other servicers by the end of the year, according to recent correspondence between Senator Elizabeth Warren (D-Mass.) and Secretary of Education Linda McMahon. The move could have significant impacts for thousands of student loan borrowers.
The department outsources management of its vast federal student loan portfolio to several outside contractors. The current array of student loan servicers includes Nelnet, Aidvantage, EdFinancial, and MOHELA. MOHELA, which previously had managed the Public Service Loan Forgiveness program before its operations were migrated to StudentAid.gov, has been the subject of withering criticism by student loan borrower advocacy organizations and elected officials for billing errors and poor customer service, not just limited to the PSLF program.
For frustrated student loan borrowers whose accounts are currently handled by MOHELA, a transfer to a different loan servicer may be welcome news. But loan servicing transfers have historically been disruptive, and can sometimes lead to additional problems. Here’s what borrowers should know.
Department of Education Will Transfer Student Loans From MOHELA This Year
The Department of Education confirmed last month that it plans to transfer federal student loan accounts from MOHELA to other loan servicers later this year.
“FSA is prioritizing efforts to improve customer service to students and parent borrowers,” said Sarah Ursprung, Acting Assistant Secretary for Legislation and Congressional Affairs at the Department of Education in a letter sent to Senator Warren last month. “FSA is collaborating with MOHELA to help the servicer manage the multiple strains on its portfolio to help drive overall improvement. As part of these efforts, FSA intends to transfer a portion of MOHELA’s PSLF portfolio to other servicers later this year.”
Ursprung did not provide specifics, however, in terms of the number of accounts that will be transferred to other student loan servicers, the timeline of these transfers, or which of the department’s other servicers will receive the transferred accounts. However, Ursprung suggested that some, but not necessarily all, borrowers who are on track for PSLF would be subject to a loan servicing transfer. Now that MOHELA is no longer managing the PSLF program following the system migration to StudentAid.gov that was completed last year, borrowers do not need to be with a specific servicer to pursue student loan forgiveness under the program.
MOHELA Has Been Criticized For Badly Managing Student Loans
MOHELA has been widely criticized for its student loan servicing practices. Under the Biden-Harris administration, the loan servicer was penalized for allegedly sending untimely or incorrect billing statements to borrowers. More recently, MOHELA sent letters to borrowers containing misleading information about interest accrual; MOHELA subsequently issued a clarifying statement.
The servicer has also been accused of using controversial call deflection tactics resulting in extremely long call hold times and an inability for borrowers to reach customer service agents to help them navigate an increasingly complex federal student loan system. A joint report released last year by the Student Borrower Protection Center and the American Federation of Teachers accused MOHELA of intentionally pushing student loan borrowers into a “byzantine loop of misinformation and false promises.”
“The ‘call deflection’ scheme diverts borrowers away from customer service representatives—often to non-operative parts of the MOHELA website—even though many servicing functions can only be performed by a customer service representative,” said the SBPC and AFT in a joint statement announcing the report last year.
Senator Warren echoed many of these criticisms in her response earlier this month to the Department of Education’s letter confirming that student loan accounts with MOHELA will soon be transferred to other loan servicers.
“You also disclosed that ED will be moving some of the Missouri Higher Education Loan Authority’s (MOHELA’s) federal student loan portfolio to other servicers later this year, a process that the Biden Administration set into motion given MOHELA’s abysmal performance,” said Senator Warren in her response letter. “You admitted that you were doing so to improve MOHELA’s performance, and I appreciate your acknowledgement and action—to my knowledge, the first such admission from the Trump Administration—in response to MOHELA’s failures to adequately serve borrowers.”
Warren went on to say, “MOHELA has consistently exhibited atrocious customer service, even compared to all other federal student loan servicers. For example, in the fourth quarter of 2024, MOHELA took roughly seven times as long to answer phone calls from borrowers compared to the servicer with the second-worst average wait time.” In her letter, Warren demanded that Secretary McMahon release more information on MOHELA’s performance, and explain how the department would respond if MOHELA’s student loan servicing operations do not improve.
MOHELA has vehemently denied allegations of poor customer service or inadequate student loan servicing.
“Any claims that MOHELA does not act in the best interest of the borrowers we serve as a federal contractor is simply not true,” said a MOHELA spokesperson last year in response to the SBPC and AFT report. “MOHELA’s priority has always been on helping the student borrowers that we are here to serve while they navigate the often complex and overwhelming federal repayment process, and that is what we remain proudly committed to doing.”
And the Department of Education under the Trump administration has defended MOHELA, arguing that its operations are improving.
“MOHELA’s performance is steadily showing progress, and FSA’s focus remains on improving the borrower experience,” said Ursprung in her letter to Senator Warren last month, appearing to acknowledge that MOHELA’s loan servicing operations may have had some room for improvement. “The Department looks forward to continuing to review the performance of all our current contractors with the goal of improving service delivery on behalf of American students, their families, and taxpayers.”
Transferring Student Loans To Other Servicers Can Cause New Problems
While borrowers who have been frustrated by MOHELA’s performance may welcome a transfer to a different student loan servicer, historically these types of transfers have not always gone well.
“Where a borrower’s data has become lost or corrupted as a result of poor data management by a particular servicer, subsequent transfers may result in servicers sending inaccurate periodic statements, borrowers losing progress toward forgiveness, and borrowers having difficulty in rectifying past billing errors,” said the Consumer Financial Protection Bureau in a 2022 report.
The Department of Education sought to provide assurances that any student loan servicing transfers would go smoothly. “This work will be done thoughtfully and in a responsible way that avoids negative impacts to borrowers,” said Ursprung in her letter last month.
The CFPB urges borrowers who may be subject to student loan servicing transfers in the coming months to remain vigilant. The agency suggests that borrowers ensure their contact details with their current loan servicer and at StudentAid.gov are up to date and accurate; open all correspondence (mail and email) that is sent by the Department of Education and its contracted loan servicers; download and save key records and correspondence including payment histories and important letters; and be prepared to have to re-establish auto-debit or billing information to keep student loans on track once the loan servicing transfer has occurred.
