The Department of Education has been transferring large batches of federal student loans to new loan-servicing companies 2014 leaving in the lurch some borrowers who are suddenly encountering problems with their loans, such as payments that are mysteriously adjusted up or down.
The switch, which has been going on for months and will ultimately include millions of loans, is mandated by a little-known provision tucked into the 2010 healthcare overhaul. Pushed by a consortium of nonprofit student loan companies, the provision forces the DOE to use nonprofit loan servicers. But at least in the short run, the switch has caused problems.
Borrower Isabelle Baeck said that after a new servicer, Mohela, took over her loans in December, she received a letter saying that her monthly payments had been reduced to $50 2014 roughly a quarter of what they had been. The change meant Baeck would ultimately pay more in interest over a longer period of time. Concerned, she said she has made repeated calls to get the problem fixed, only to have the payments repeatedly readjusted.
A Mohela representative declined to comment on specific borrower situations but said that the company is working hard to minimize disruption and to resolve issues as they arise.