Several student loan borrowers say they were hit with higher payments and fees after their loan balances were transferred to another servicer, they say, without warning.
Roughly 500,000 student loans owned by the United States Department of Education were recently transferred to Missouri-based Mohela.
Included in that group was Chicago software consultant Aakash Rami, who described it as a “God-send” when he went online to check his account and saw a startling balance: Zero.
The thousands of dollars in federal loan debt had been transferred, he said, from Direct Loan Servicing to Mohela, without notification. Worse, he said, was the new payment amount Mohela listed.
"It said that the monthly payment amount, the monthly installment, was $331, and that was 74 percent higher than my payment amount with Direct Loan Servicing. I was really upset. I just didn’t understand why the payment increase was so much," said Rami.
Calls to the new servicer resulted in more confusion and frustration, he said, so he turned to social media to see if his case was a fluke. Rami created a Facebook page to attract similarly-situated Mohela borrowers, some of whom surfaced, he said, with details identical to his.
On websites and blogs, Rami said he found recent graduates who were as confused and angered by the change in their monthly payments.
"Absolutely questionable," he said. "I mean, it’s not just me experiencing this problem. There’s a whole bunch of people out there. And it’s really upsetting. I’m not doing anything wrong, I’m just going about my life, minding my own business, paying my bills on time- and then they just come into my life and say,’Hey! You owe us this money!'"
Still, he said, he was unable to reach anyone in customer service at Mohela who could give him a cogent explanation of why his amounts due were so much higher than just the previous month.
At the request of NBC Chicago’s Target 5, Chicago attorney David Leibowitz reviewed Rami’s paperwork. Leibowitz, who handles a range of financial issues in his practice, said he saw red flags right away.
"It would seem Mohela did not have the right to impose fees, costs, and charges all at once, and even if they did have the right to impose fees, costs and charges all at once they’re having done so without being transparent," Leibowitz said. "Having done so without an explanation, it's questionable. It would not seem to be proper servicing procedures, and the fact he is speaking with several customer service representatives that don’t know anything? That’s not particularly good, either."
In a statement, the Department of Education said it anticipates that issues may arise when loans are transferred from one servicing system to another:
"The majority of these questions result from unfamiliarity with a new servicing system or the anxiety that understandably accompanies a change to a new servicer. Earlier this year, the Department of Education tried to address this issue by requiring that both the sending and receiving servicer notify the borrower of the loan transfer.
However, in a limited number of cases, there are circumstances unique to a borrower or his/her loan that become apparent during the transfer process. Typically, these issues are due to the complexity of the particular borrower’s loan history or an anomaly in the borrower’s loan record and not the result of the transfer process. Once the new servicer takes possession of a loan, they must re-disclose new payment terms if they determine the loan will not be paid in accordance with the original terms of the agreement.
In the case of Mohela, they received over 500,000 accounts from the Department since October 2011. The vast majority of these loans were transferred without any service interruption or inconvenience to the borrower. However, a limited number of borrowers expressed concerns about adjustments to their payment terms made by Mohela once they took possession of these loans. Mohela attempted to reach these borrowers to address any questions they may have about the conversion process.
We regret any inconvenience this may have caused our borrowers and encourage them to contact their servicer if they have questions. If a mistake was made, we can correct the problem to ensure the borrower is not harmed.”
Rami ultimately got some answers in a subsequent call from Mohela, along with a forbearance and an apology, but remains concerned about others who may be in the same boat.
"It feels very wrong… I’m not going to be stepped on or bullied into paying making a payment I’m not responsible for. It’s about what’s right, that’s what I think," he said.
A DoE spokesman said borrowers with questions or concerns should always start with their servicers.
If a student loan borrower is unable to resolve questions about their account with their loan servicer, they can request assistance by contacting the Federal Student Aid Ombudsman at www.ombudsman.ed.gov. The Ombudsman is a confidential, neutral, independent resource for informal resolution of federal student loan issues.
Mohela said it is not permitted to talk directly about loans it services, but that it takes customer service complaints seriously.