MOHELA Class Action Lawsuit: Student Loan Servicing Failures

Public Service Loan Forgiveness Mishandling

The Public Service Loan Forgiveness program promises tax-free loan forgiveness after 10 years of qualifying payments for borrowers employed in public service. MOHELA became the exclusive servicer of PSLF accounts in 2022. Borrowers and their advocates allege that MOHELA's administration of PSLF has been plagued by processing errors, delayed responses, miscommunication about payment counts, and incorrect denials that have forced borrowers to restart their qualification periods.

The consequences of MOHELA's alleged errors are particularly severe for PSLF borrowers: a miscounted payment or an improperly processed period of qualifying employment can delay forgiveness by months or years -- costing borrowers thousands of dollars in continuing payments on loans they believe should already be forgiven.

Billing and Payment Processing Failures

MOHELA has acknowledged processing backlogs that resulted in thousands of borrowers being placed in forbearance without their consent (which can affect payment count tracking), receiving incorrect billing statements, or being incorrectly reported to credit bureaus as delinquent during periods when they should have been in forbearance or income-driven repayment.

The Department of Education has withheld performance incentive payments from MOHELA due to servicing failures -- an acknowledgment by the federal government that MOHELA's performance has fallen below contracted standards. This regulatory history provides strong evidentiary support for plaintiffs' class action claims. Related: Sallie Mae student loan servicing lawsuit.

Consumer Protection and FDCPA Claims

Some MOHELA claims are advanced under the Fair Debt Collection Practices Act, which prohibits deceptive and unfair practices in debt collection. Borrowers allege MOHELA misrepresented the status of their loans, improperly threatened adverse consequences for payments that were in fact current, and failed to properly respond to disputes. The FDCPA provides statutory damages of up to $1,000 per violation plus actual damages.

State consumer protection claims are also advanced in jurisdictions where MOHELA operates. Borrowers in states with strong student loan servicing laws -- California, Illinois, and New York -- have additional legal frameworks available.

Who Qualifies for the MOHELA Lawsuit

Federal student loan borrowers whose accounts are or were serviced by MOHELA and who experienced: incorrect PSLF payment counts; improper placement in forbearance; billing errors; credit reporting errors; or who were incorrectly denied PSLF forgiveness may have claims. Documentation is critical: maintain records of all MOHELA correspondence, your PSLF tracker screen, and any credit reports showing inaccurate delinquencies.

Status 2026

MOHELA faces class action proceedings in multiple jurisdictions and ongoing federal oversight. The Department of Education has taken remedial actions to address PSLF processing failures for the borrower population. Class action litigation seeking damages for individual borrowers continues separately from the federal remediation programs.

How to Get Legal Help

If you believe you qualify based on the eligibility criteria described above, the next step is a free consultation with an experienced attorney. Most plaintiff-side attorneys handling these cases work on contingency -- meaning you pay nothing unless your case results in a recovery. Bring any relevant documentation including receipts, correspondence, or evidence of the harm you experienced.

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