Missouri Higher Education Loan Authority, or MOHELA, has been in the student loan industry for almost four decades. While many borrowers may be familiar with MOHELA as a private student loan lender, not all may know that this nonprofit institution is also a federal student loan servicer.
MOHELA first began servicing federal student loans in 2011. It was recently awarded a new contract by the Department of Education as one of five loan servicers going forward.
This new contract will likely result in more borrowers’ federal loans being transferred to MOHELA for servicing. But, based on current available information from the Department of Education, this transition won’t take place until late 2021 to early 2022, depending on who your current loan servicer is.
As loans start to change hands in the future, many borrowers may begin to explore refinancing options. Some borrowers may want a lower interest rate, while others may be looking for a better customer experience. But refinancing isn’t always the best solution, and choosing a lender requires careful consideration.
Here’s what you need to know about MOHELA student loan refinance options.
What is MOHELA?
MOHELA was established in 1981 as a public agency of the state of Missouri. Since then, it has further established its brand in the student loan industry.
It currently holds $1.2 billion in Federal Family Education Loan Program (FFELP) loans and $64.1 million in private student loans. But MOHELA also services over $67 billion of Federal Direct Loan Program (FDLP) and third-party private student loans.
Understanding MOHELA’s role in handling these different loan types can become a little confusing. MOHELA functions in the following capacities for student loan borrowers:
- As a private lender. MOHELA finances, owns and manages its own private student loans internally.
- As a servicer for federal and private student loans. MOHELA is contracted as a third-party servicing provider, but these loans are owned by another private lender or the Department of Education.
When functioning as the loan servicing provider, MOHELA only manages the repayment process; it doesn’t own the actual loan.
If MOHELA is currently your federal loan servicer — or if it becomes your servicer in the future — its primary roles are to collect payment and assist you with repaying your loans. But the government will continue to own your loan, and the servicer for your loan could change again in the future.
Loan servicing responsibilities include providing you with repayment options and loan guidance. But this guidance is often within a limited scope, which means there may be a better route for your unique situation.
Can I refinance my MOHELA student loan?
If MOHELA ends up being your loan servicer, you might be eager to explore other options through refinancing.
The biggest benefit of refinancing is the ability to lower your interest rate, which could save you a significant amount of money over the life of your loan.
Other MOHELA student loan refinance benefits may include:
- Adjusting your monthly payments either by reducing your interest rate or changing your repayment terms.
- Streamlining your repayment by combining multiple student loans into one loan.
- Removing a cosigner from your student loans.
Refinancing can also give you a chance to switch to a new lender with better customer service.
In terms of borrower feedback, MOHELA isn’t the worst loan servicer — but it isn’t the greatest either. MOHELA came in at seventh place in Student Loan Planner’s loan servicer ranking based on complaints made with the Consumer Financial Protection Bureau.
Related: Check out our full MOHELA review.
But poor customer service shouldn’t be your driving force for wanting to refinance, especially if you have federal student loans.
What to consider before refinancing federal student loans
Anytime you refinance a federal loan with a private lender, you lose access to federal benefits and protections. For example, you won’t be able to take advantage of flexible income-driven repayment (IDR) plans or apply for forbearance or deferment. You also won’t be eligible for loan forgiveness through programs like Public Service Loan Forgiveness (PSLF) or IDR forgiveness.
As a general rule of thumb, borrowers with federal student loans should consider refinancing if you:
- Work in the private sector.
- Have a solid emergency fund.
- Owe less than 1.5 times your annual income.
For example, let’s say you have a $100,000 salary working as a marketing manager for a private company and only owe $75,000 in federal student loans. Because you owe well under 1.5 times your income (which would be $150,000 in this case), there’s a good chance you’d benefit the most by refinancing to a lower interest rate and aggressively paying off your loans in less than 10 years.
But if you work in the public sector, say for a local government entity or nonprofit organization, you’d likely save the most money by taking advantage of PSLF and avoiding refinancing altogether.
Refinance MOHELA loans with a plan
For borrowers who are interested in paying their student debt in full and as quickly as possible, refinancing is the way to go.
If you already have private student loans, shop around for lower interest rates at least once per year. You can refinance as many times as you want and you might even get cash-back bonuses from Student Loan Planner’s lending partners.
But if you have federal student loans, you should only consider refinancing if you’re confident you won’t need federal loan benefits. You might be able to lower your monthly payment by switching to an IDR plan that is based on your income rather than how much you owe. With this strategy, you’ll keep all the benefits federal student loans offer, while likely paying less each month than you would if you were to refinance.
With so many pros and cons to weigh, it’s best to get customized student loan advice to maximize your savings. Our team of student loan experts can walk you through various repayment scenarios tailored to fit your student loan situation and career goals. Schedule a one-hour consultation to get started on the most efficient repayment path for you.