How MOHELA Student Loan Forgiveness Works
Over the past couple of years, there has been a lot of commotion within the federal student loan system. Some of the changes offered welcomed relief to borrowers, such as the temporary pause on monthly payments and interest charges due to the Covid-19 pandemic. But other long-term adjustments simply led to further confusion.
One of the biggest disruptions is the transfer of federal student loan accounts that were previously held by FedLoan Servicing to the Missouri Higher Education Loan Authority (MOHELA). If you have federal student loans managed by MOHELA and want to pursue loan forgiveness, here’s what you need to know about MOHELA student loan forgiveness.
What Is MOHELA?
MOHELA has a track record of over 40 years as a federal student loan servicer. It’s one of the loan servicers—along with others like Nelnet and Great Lakes—that has extended its federal servicing contract through at least 2023.
As a loan servicer, MOHELA helps borrowers manage their federal loan accounts and payments. This includes addressing billing questions and general inquiries as well as providing information about repayment options.
MOHELA’s New Loan Servicer Responsibilities
MOHELA recently became the exclusive student loan servicer for two federal programs: Public Service Loan Forgiveness (PSLF) and the Teacher Education Assistance for College and Higher Education (TEACH) grant. This role previously belonged to the Pennsylvania Higher Education Assistance Agency (PHEAA)—also known as FedLoan Servicing—which will leave the servicing industry after its contract expires.
Borrowers who were on track for student loan forgiveness through the PSLF program or who received a TEACH grant will have their student loan accounts transferred to MOHELA beginning in July 2022. As the acting servicer for PSLF, MOHELA will now be responsible for guiding both current and new PSLF-eligible borrowers through the program’s requirements and application process.
Can I Get Student Loan Forgiveness Through MOHELA?
While you might work directly with the servicer, there isn’t a specific MOHELA student loan forgiveness program. Instead, MOHELA oversees your eligibility for the Department of Education’s PSLF and TEACH grant programs.
For example, if you’re pursuing PSLF and believe you’ve met the requirements, you’ll submit an official application to MOHELA. The servicer will process this and review your student loan account, employment history and repayment records. If MOHELA finds that you’ve satisfied the eligibility criteria, it will update your account accordingly.
If you’ve received a TEACH grant, MOHELA will monitor your progress toward completing the required five-year service obligation. If you don’t fulfill your teaching agreement, your loan will be converted to a direct subsidized loan that’s serviced by MOHELA.
4 Forgiveness Programs Through MOHELA
Here are some of the forgiveness programs available for federal student loans—including those serviced by MOHELA.
As mentioned, PSLF is a notable federal student loan forgiveness option available for borrowers with direct loans, which is now managed by MOHELA. You could be eligible for this program if you:
- Work full time for a qualifying employer. This includes federal, state, local and tribal government organizations as well as nonprofits.
- Make 120 qualifying payments. You must sign up for one of the income-driven repayment (IDR) plans and make 120 qualifying payments toward your direct loans.
If you fulfill these requirements, you could have your remaining direct loan balance forgiven tax-free.
Teacher Loan Forgiveness
Another option is Teacher Loan Forgiveness. Unlike PSLF, this program isn’t managed by MOHELA. But if you have loans serviced by MOHELA and meet the requirements, you could be eligible to have a portion of your debt forgiven.
To be eligible, you must:
- Be a highly qualified teacher. This means you have earned at least a bachelor’s degree, received full state certification and not had certification or licensure requirements waived on an emergency, temporary or provisional basis.
- Complete a service agreement. You must teach full time for five complete, consecutive academic years at a low-income school or educational service agency.
You can get either $5,000 or $17,500 of your loans forgiven, depending on the subject you teach. Also note that you can’t get credit for both Teacher Loan Forgiveness and PSLF at the same time.
If you’re struggling to make your payments, signing up for an income-driven repayment plan could be a good idea. Under this type of plan, your monthly payments will be based on your adjusted gross income and family size. All servicers, including MOHELA, can place borrowers on an IDR plan upon request.
Additionally, you could have any remaining balance on your loans forgiven after making payments for 20 or 25 years, depending on the plan. Keep in mind that unlike PSLF, IDR forgiveness is not tax-free.
There are four types of IDR plans you can choose from:
- Pay As You Earn (PAYE): If you sign up for PAYE, your payments will be capped at 10% of your discretionary income, and you could have your remaining balance forgiven after 20 years. To be eligible, you must be able to demonstrate a partial financial hardship.
- Revised Pay As You Earn (REPAYE): On the REPAYE plan, your payments will be 10% of your discretionary income—note that this payment amount isn’t capped like with other IDR plans. If you borrowed for an undergrad degree, you could be eligible for forgiveness after 20 years, while graduate loans can be forgiven after 25.
- Income-Based Repayment (IBR): On this plan, your payments are limited to 10% or 15% of your discretionary income, and your loan balance can be forgiven after 20 or 25 years, depending on when you took out your loans. Like with PAYE, you must have a demonstrable partial financial hardship to qualify for IBR.
- Income-Contingent Repayment (ICR): If you sign up for ICR, your payments will be 20% of your discretionary income (or how much you’d pay on a 12-year, income-adjusted plan), and your loans can be forgiven after 25 years. Note that this is the only IDR plan available to borrowers with parent PLUS loans—though a PLUS loan must first be consolidated into a direct consolidation loan before you can sign up.
Federal Loan Discharge Programs
In some cases, borrowers could be eligible to have their federal student loans discharged, which could be helpful if you’re not eligible for forgiveness.
Some of the discharge programs available include:
- Closed-school discharge: For borrowers whose schools closed while they were enrolled or soon after they withdrew
- Total and permanent disability discharge: For borrowers who have a total and permanent disability
- Death discharge: Available if the primary borrower or student who benefitted from a parent PLUS loan dies
Typically, a loan discharge involves a special circumstance that qualifies you to stop making further payments toward your federal student loans. Each program has its own criteria that you’ll need to meet as well as documentation that you’ll have to provide in order to qualify.
How to Contact MOHELA
If your student loans have recently been transferred to MOHELA and you have questions about your loan forgiveness options and eligibility, contact the student loan servicer directly. You can call their toll-free customer support line at 888-866-4352 during their operating hours:
- Monday: 7 a.m. to 10 p.m. CT
- Tuesday through Friday: 7 a.m. to 7 p.m. CT
- Saturday: 9 a.m. to 1 p.m. CT
You can also contact the servicer by fax at (866) 222-7060 or via mail at:
633 Spirit Drive
Chesterfield, MO 63005-1243