Student loan borrowers wrongly told they’re in default as trump repayment changes fuel MOHELA confusion
Some student loan borrowers were wrongly told that their payments were overdue and their loans were at risk of default. The notices were sent by MOHELA, one of the federal student-loan servicers, to some borrowers in recent days. In reality, the affected borrowers were not actually behind on their payments.
The US Education Department confirmed that the notices were sent by mistake. An Education Department spokesperson told Business Insider that the department knows about an issue affecting “a small number of borrowers at one servicer.” The department said the problem has now been fixed.
Borrowers affected by the error will be contacted by email. The Education Department said it will notify borrowers that the delinquency notices they received were incorrect. The false notices have caused more confusion at a difficult time for student-loan borrowers.
Trump student loan changes
The confusion comes as President Donald Trump’s student-loan repayment overhaul takes effect. The new changes began on July 1 and include new repayment options and the transition of millions of borrowers away from the Biden-era SAVE plan, according to Business Insider. Many borrowers are facing higher monthly payments because of the changes. At the same time, borrowers have reported problems with their accounts and difficulty getting clear answers from their loan servicers.
MOHELA payment error
The latest MOHELA problem involved borrowers being told they were seriously behind on payments even when they did not owe a payment. According to Forbes, some borrowers said they received sudden emails saying their loans were past due even though their loans were in forbearance and no payment was required.
MOHELA warns borrowers
MOHELA acknowledged that some borrowers had received inappropriate delinquency notifications. In a statement sent by email on Monday, the company said it was aware of the concerns and that such cases were being reviewed and addressed. MOHELA told borrowers to keep checking their accounts and messages.
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New student loan plans
The latest problem comes while the Trump administration is making several major changes to the student-loan system at the same time. The Education Department is working to phase out the SAVE plan and has introduced a new income-driven repayment option called the Repayment Assistance Plan, or RAP. The Education Department launched RAP last month as part of the broader repayment changes. The department is also changing rules for how students can borrow money and changing repayment options for federal Parent PLUS loans.
Student loan payment problems
Borrowers said these mistakes make financial planning harder. When borrowers do not know their correct monthly payment or loan status, it becomes difficult to prepare their household budgets. The problems are happening as the number of borrowers in federal student-loan default continues to rise. More than 9 million borrowers are now estimated to be in default, according to Forbes.
The Education Department says it is still focused on improving the service borrowers receive. A department spokesperson said the agency remains focused on making sure student-loan borrowers receive high-quality customer service. For borrowers who receive a suspicious delinquency or default notice, checking both accounts is important. Borrowers should log into their StudentAid.gov account and their loan servicer account to compare their loan status and payment information.
What borrowers should do now
Borrowers should also regularly check their emails and loan-servicer messages. This can help them spot incorrect payment amounts, repayment-plan notices or other account problems early. The key point is that receiving a past-due notice does not necessarily mean the borrower is actually in default. In the latest case, the Education Department confirmed that some of the notices were sent because of an error.
The bigger problem is the growing confusion around the student-loan system. Borrowers are dealing with new repayment plans, the end of SAVE, changing payment amounts, updated online systems and servicing errors at the same time. For now, borrowers affected by the MOHELA error should watch for an email confirming the mistake. The Education Department said the issue has been fixed and affected borrowers will be informed.