Introduction
In a rare display of bipartisanship, Democratic lawmakers have expressed interest in collaborating with Education Secretary Linda McMahon to address concerns over the oversight of student-loan servicers. This potential area of cooperation comes amid growing scrutiny of the performance of companies responsible for managing federal student loans. The focus has particularly fallen on MOHELA, a servicer that has been identified as one of the worst performers based on key metrics such as customer satisfaction, call wait times, and call abandonment rates. The effort to hold these servicers accountable is part of a broader push to ensure that borrowers receive the support they need to manage their student debt effectively.
A Rare Area of Agreement Between Democrats and the Trump Administration
The unlikely alignment between Democratic lawmakers and the Trump administration on this issue was highlighted when Senate Minority Leader Chuck Schumer, Senator Elizabeth Warren, and Representative James Clyburn sent a letter to Education Secretary Linda McMahon. In the letter, they emphasized their willingness to work together to address the subpar performance of federal student-loan servicers, particularly MOHELA. Despite their political differences, the lawmakers acknowledged that ensuring accountability for these servicers could be a rare area of common ground. The letter underscored the importance of improving the experiences of student-loan borrowers, who often face significant challenges when dealing with these companies.
The Data on MOHELA’s Performance
The Education Department’s recent data revealed that MOHELA, which manages over 7 million borrowers’ accounts, has consistently underperformed compared to other servicers. The metrics used to evaluate performance included customer satisfaction, call wait times, and call abandonment rates. MOHELA’s average call wait time was found to be 2 minutes and 55 seconds, significantly higher than other servicers like Central Research, Inc., which had an average wait time of just 14 seconds. Additionally, MOHELA’s call abandonment rate was 7.37%, far exceeding the rates of Nelnet (0.76%) and Central Research (1.33%). These findings raise concerns about the quality of service provided to borrowers, many of whom rely on these companies for critical guidance and support.
McMahon’s Stance on Servicer Accountability
Education Secretary Linda McMahon has signaled her openness to reviewing the performance of student-loan servicers. Following her confirmation hearing, she expressed her intention to work with the Department of Education and Federal Student Aid (FSA) staff to evaluate the performance of current contractors, with the goal of enhancing service delivery for students, families, and taxpayers. This stance aligns with the concerns raised by Democratic lawmakers, who have called for "corrective measures" to hold servicers accountable for poor performance. The lawmakers specifically suggested that if MOHELA fails to improve, the Department of Education should consider terminating its contract with the servicer.
The Push for Greater Accountability
The push for greater accountability is not new. In 2023, former President Joe Biden’s administration took enforcement action against MOHELA for failing to send timely billing statements to 2.5 million borrowers, resulting in the withholding of over $7 million in pay. Similar actions were taken against other servicers for failing to meet their contractual obligations. The Biden administration also introduced an accountability framework to ensure that servicers prioritize the best interests of borrowers. Now, with McMahon at the helm, there is a renewed focus on whether she will continue this emphasis on accountability or chart a different course.
McMahon’s Broader Policy Goals and the Future of the Department of Education
While McMahon’s stance on servicer oversight remains to be fully seen, her broader policy goals have already sparked significant debate. In a memo outlining the Department of Education’s "final mission," she prioritized strengthening the role of parents in their children’s education, removing "divisive DEI (Diversity, Equity, and Inclusion) programs" from public education, and aligning postsecondary education programs with workforce needs. Additionally, McMahon has expressed interest in advancing President Trump’s goal of dismantling the Department of Education, though she acknowledged that such a move would require bipartisan support. She is exploring alternatives, such as transferring the administration of student loans to another federal agency. McMahon has stated that her role is to convince Congress that the steps being taken are in the best interest of students and that they would support closing the Department of Education if they are confident that state-level efforts will provide better educational outcomes.
In summary, the issue of student-loan servicer accountability presents a rare opportunity for cooperation between Democratic lawmakers and the Trump administration. The data on MOHELA’s performance highlights the urgent need for reforms to ensure that borrowers receive the support they deserve. While McMahon’s willingness to review servicer performance is a positive sign, her broader policy goals and the future of the Department of Education remain uncertain. As the debate over the role of the federal government in education continues, the experiences of student-loan borrowers will likely remain a key focal point.
