Missouri Higher Education Loan Authority (MOHELA) is one of a handful of loan servicers that manages the $1.56 trillion federal student loan portfolio. Although MOHELA’s current role remains relatively small, it’s slated to soon become one of the major loan servicing players.
If you have federal student loans, there’s a chance you’ve already dealt with MOHELA or will in the future. Therefore, it’s important to stay on top of your available repayment strategies — especially when it comes to loan forgiveness.
There aren’t any exclusive MOHELA student loan forgiveness programs. But there are various federal loan forgiveness programs that MOHELA borrowers might qualify for.
Here’s what you need to know about your MOHELA loan forgiveness options.
A quick note about MOHELA and its role with student loans
MOHELA has been working with student loans for several decades as a private lender. It began servicing federal student loans in 2011 and was recently awarded a new contract as one of five primary federal loan servicers going forward.
This overhaul of loan servicers is scheduled to take place by early 2022. However, the contract with the Department of Education happened under the Trump administration. So, it’s unclear whether it’ll move forward or be altered under President Biden’s administration.
But if it does move forward, MOHELA could take on a significant share of borrowers who are on income-driven repayment (IDR) plans. And, therefore, be responsible for loans that might eventually qualify for loan forgiveness.
Currently, MOHELA only manages a small portion of IDR plans. So small that the Department of Education bundles this loan servicer with other nonprofit servicers when reporting data.
For example, the Revised Pay As You Earn (REPAYE) program has more than $191.6 billion outstanding for more than 3.23 million borrowers as of September 2020. Nonprofit servicers as a whole (not just MOHELA) only service about $11 billion of outstanding loans on REPAYE, which equates to roughly 320,000 borrowers.
So, it should be interesting to see how MOHELA handles this major transition and what share of repayment plans they will take on if the contract is honored.
We’ll continue to monitor developments with this loan servicing contract as the new administration works through changes within the Department of Education.
MOHELA loan forgiveness programs for federal loans
If you have federal student loans with MOHELA, here are some forgiveness options to thoroughly explore.
1. Public Service Loan Forgiveness
MOHELA Public Service Loan Forgiveness (PSLF) allows borrowers to earn tax-free loan forgiveness in as little as 10 years. To be eligible for PSLF, you must:
- Work full-time for a qualifying employer in the public or nonprofit sector
- Make 120 qualifying payments under an IDR plan
- Have eligible Direct Loans (or consolidate your loans with a Direct Consolidation Loan)
You can use the new PSLF Help Tool to help you submit your Employment Certification Form (ECF) and apply for forgiveness.
Note that FedLoan Servicing currently manages the PSLF program. Once you submit an ECF, your loans will automatically be transferred from MOHELA to FedLoan Servicing.
2. Income-driven repayment forgiveness
IDR plans can lower your monthly payment by capping your payment at 10% to 20% of your discretionary income. But they can also make you eligible for MOHELA loan forgiveness after 20 to 25 years of qualifying payments.
Popular IDR plans include:
- Pay As You Earn (PAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
These plans require recertification of your income and family size each year in order to determine your monthly payment.
Keep in mind that IDR loan forgiveness will be taxed, so it’s important you begin saving for this eventual tax bomb.
3. Teacher Loan Forgiveness
Teachers might be eligible to receive up to $17,500 of MOHELA student loan forgiveness by using the Teacher Loan Forgiveness program.
However, this program has some caveats and limitations that teachers should be aware of.
For instance, the full $17,500 of forgiveness is only available to “highly qualified” math and science teachers at the secondary level and special education teachers. Other teachers max out loan forgiveness at $5,000.
So, most teachers are better off pursuing PSLF for total loan forgiveness.
4. Alternative forgiveness options
Depending on your situation, you might be eligible to have your MOHELA student loans canceled through one of these alternative provisions:
- Total and Permanent Disability (TPD) discharge. You must have documentation showing you meet TPD requirements from one of three sources: the Department of Veterans Affairs (VA), the Social Security Administration or a physician.
- Closed school discharge. You might be eligible for discharge if your school closed while you were enrolled or soon after you withdrew.
- Death discharge. The federal government will forgive a borrower’s student loans in the case of death. The same applies if a parent who has Parent PLUS loans passes away.
StudentAid.gov details additional situations that could result in having your loans forgiven, canceled or discharged.
Other student loan forgiveness programs to explore
Even if you plan on pursuing MOHELA loan forgiveness through federal programs, you might still be able to take advantage of other state- or profession-based loan forgiveness programs.
Many states have established student loan repayment programs designed to boost employment in certain regions or professions.
If you need help figuring out the best repayment plan — which might include loan forgiveness — our student debt experts can create a custom plan for you.