The Missouri Higher Education Loan Authority (MOHELA), an obscure financial services company based just outside of St. Louis, has emerged as a central player in the legal battle over President Joe Biden’s multibillion-dollar student debt relief plan. Six Republican-led states, including Missouri, have filed a lawsuit challenging the plan, which aims to forgive student loan debt for more than 40 million Americans. The lawsuit, set to go before the Supreme Court next year, will determine the future of one of Biden’s most significant and contentious domestic policy programs.
MOHELA, a state-created loan company, has quietly become one of the nation’s largest student loan servicers while deepening its ties to the Education Department over the past decade. The company now manages the accounts of nearly 7 million federal student loan borrowers, more than double what it had two years ago. Last year, it brought in more than $130 million in revenue, most of which came from its federal contract to service student loans.
MOHELA, like other loan servicers of the Education Department, had been moving ahead with implementing the Biden administration’s debt relief until it was halted by the courts in November. The company had gone so far as to finalize a letter — co-branded with both MOHELA and federal logos — notifying borrowers that their debt relief request had been completed, according to documents obtained by POLITICO under a public records request.
However, MOHELA has also been drawn into the fight against student debt relief by Missouri Attorney General Eric Schmitt, one of the lead plaintiffs in the multi-state lawsuit, even though the company is not a party to the case. The other states pursuing the legal challenge include Nebraska, Iowa, South Carolina, Kansas, and Arkansas. They argue that Biden’s debt relief plan will harm them in various ways, such as lowering tax revenue or diminishing the value of investments tied to student loans.
Missouri argues that MOHELA will lose money under Biden’s relief plan because it will have fewer accounts to manage. According to Missouri, less revenue for the company will make it more challenging for MOHELA to make required payments to a state fund that helps its public colleges and universities. Phil Kerpen, a conservative political organizer who leads American Commitment, circulated the idea of seizing on the harm to loan servicers that work for the Education Department, like MOHELA, as “the best opportunity to bring a successful lawsuit.”
All the loan servicers hired by the Education Department decided against suing over the debt relief plan. MOHELA presented a different situation, Kerpen noted, because of the company’s relationship to a state with a Republican attorney general who could take action on its behalf.
When Biden first announced his plan to forgive student debt in August, Republicans and conservative groups vowed to bring legal challenges to the policy. However, finding a plaintiff who would have a concrete injury that allows them to bring a lawsuit was a significant challenge.
MOHELA’s role in the case has brought fresh criticism from some Democrats and consumer advocacy groups. Progressive Democrat Representative Cori Bush, whose district neighbors the company’s headquarters, criticized MOHELA for what she called an “unconscionable” effort to stop debt relief. She added that MOHELA is “a proxy for the six conservative attorneys general” to challenge the administration’s debt relief program and “would profit off this challenge’s success.”
MOHELA responded to Bush’s criticism last month by appearing to distance itself from the lawsuit. The company explained in a letter to Bush that its “executives were not involved” with the Missouri attorney general’s decision to file a lawsuit.
With much at stake for the company’s federal loan servicing business, MOHELA officials from the company have also sought to reassure Democratic congressional aides and Biden administration officials that they were not