A group of Democratic senators is demanding answers from student loan servicer MOHELA after borrowers received erroneous notices warning that their loans were severely past due and at risk of default, even though many were current on their payments or otherwise not delinquent. The group of lawmakers, led by Senators Elizabeth Warren of Massachusetts and Jeff Merkley of Oregon, are asking for details on how the error occurred and how many borrowers were affected. "If a borrower does not realize that their false delinquency notice was issued in error and believes that they are on the verge of default, they might make the payment MOHELA has claimed they are responsible for, unnecessarily spending hundreds or even thousands of dollars," the lawmakers wrote.
They’ve also inquired about what steps MOHELA is taking to prevent similar mistakes in the future. Newsweek reached out to MOHELA for comment via email, but did not hear back in time for publication. For borrowers, an incorrect delinquency notice can have serious consequences.
If they didn’t realize the error, recipients could be pressured into making unnecessary payments or suffer credit score damage. Borrowers are also navigating repayment rule changes that just went into effect this summer under the Department of Education. Because MOHELA is one of the Education Department's largest student loan servicers, any widespread error could affect thousands of borrowers.
According to the lawmakers, MOHELA sent notices this month informing some borrowers that their loans were seriously delinquent and nearing default status. In some cases, borrowers logging into their accounts reportedly saw alerts indicating they owed significant past-due balances, with some notices showing amounts exceeding $10,000. An Education Department spokesperson previously acknowledged that officials were aware of an issue impacting "a small number of borrowers" at one loan servicer and said affected borrowers would receive notifications explaining the error.
However, some borrowers told Business Insider that they never received correction notices and have credit-score concerns as a result. Nine senators pushed because MOHELA sent these past-due balances right as the SAVE to Standard transition kicked off,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. No SAVE borrower could legitimately be delinquent yet.
That's what made the error impossible to write off as a coincidence.” Bloomberg Government reported that fewer than 6,000 borrowers in good standing received incorrect notices saying they were past due and at risk of wage garnishment. Federal Student Aid officials said the issue has been addressed and affected accounts were updated within days. Ellen Keast, communications director for the Department of Education, said the Education Department’s Federal Student Aid Office “addressed this issue immediately, and impacted borrowers were able to see updated monthly payment amounts within days of this coming to our attention.” In a letter sent to MOHELA, Warren, Merkley and several other Democratic senators requested information about the scope of the problem, including whether any borrowers made payments they did not owe and how the error occurred.
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