Blumenthal, Warren, & Duckworth Ramp Up Investigation into Mohela's Predatory Website Terms of Use

[HARTFORD, CT] – U.S. Senators Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), and Tammy Duckworth (D-IL) wrote to the student loan servicer Missouri Higher Education Loan Authority (MOHELA) with continued concerns over its website’s Terms of Use (TOU), which appear to be written with the intent to relieve MOHELA of liability for severe misconduct and may infringe upon student loan borrowers’ legal rights. 

“MOHELA’s explanations fail to provide persuasive justifications for these provisions…(and the t)erms are clearly written and designed to absolve MOHELA of wide swaths of damages even in the cases of significant wrongdoing,” wrote the senators.

MOHELA has repeatedly shirked its basic responsibilities as a federal student loan servicer and has been repeatedly penalized by ED for doing so. In November 2024, the Senators wrote to MOHELA to raise their initial concerns about the company’s tactics. The loan servicer’s response evaded questions, failed to provide a reasonable justification for the predatory provisions in its TOU, and made multiple false assertions.

 In its response, MOHELA: 

• Falsely claimed its TOU are in line with industry standards, even though MOHELA appears to have written its TOU to absolve it of much more severe wrongdoing compared to other major federal loan servicers’ TOU;

• Provided unconvincing explanations for its TOU provisions disclaiming any responsibility that its website contain “accurate or reliable” information and disclaiming any responsibility for correcting any “defects” on the website; and

• Failed to justify exploitative TOU sections that appear to undermine borrowers’ rights to hold MOHELA accountable for financial harms, including by limiting its liability to $100 “for all claims arising” from use of its website and making borrowers’ “sole (legal) remedy” for dissatisfaction with MOHELA’s website to stop using the website.  

MOHELA’s terms may also violate federal consumer protection law. The Consumer Financial Protection Act (CFPA) prohibits abusive contracts, including those that take “unreasonable advantage” of “unequal bargaining power.” That could apply to MOHELA’s TOU, since borrowers assigned to MOHELA have no choice but to sign the TOU and cannot choose a different loan servicer. MOHELA did not address the senators’ concerns in this area.

The lawmakers urged the loan servicer to remove all predatory provisions from its TOU and asked MOHELA to provide clarity on its decision to impose it on borrowers by March 13, 2025.  

Blumenthal has led the fight to reform our higher education system, cancel student loan debt, and hold student loan servicers accountable:

• In February 2025, Blumenthal joined 35 Democratic senators in writing to President Donald Trump, demanding that he reject Congressional Republicans’ legislative plans to increase the cost of living, including education costs, for Americans after pledging to lower costs on “Day One” of his presidency.
• In February 2025, following Elon Musk and DOGE forcing their way into the Department of Education (ED), Blumenthal joined a coalition of Democrats in demanding the Department of Education launch an investigation into Musk and DOGE’s access to federal student loan data. 
• In December 2024, Blumenthal, joined by U.S. Senators Elizabeth Warren (D-MA), Jeff Merkley (D-OR), and Ron Wyden (D-OR), revealed the alarming findings of a Senate investigation into millions of consumer credit reporting errors that occurred during the transfer of student loan accounts from Nelnet to MOHELA in 2023. The senators urged the Consumer Financial Protection Bureau (CFPB) and ED to investigate these errors and use their supervisory and enforcement authority to hold the appropriate parties accountable.
• In December 2024, Blumenthal joined 25 lawmakers in sending a bicameral letter to CFPB Director Rohit Chopra and Federal Trade Commission Chair Lina Khan, revealing the results of their investigation into Navient regarding its cancellation process for the predatory, for-profit student loans in its portfolio and urging the agencies to hold the student loan servicer accountable for any violations of federal law.
• In November 2024, Blumenthal, joined by U.S. Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Tammy Duckworth (D-IL), sent a letter blasting MOHELA for abusing borrowers with potentially illegal, exploitative terms of use.

• In August 2024, Blumenthal joined Warren, Merkley, and Wyden in launching an investigation into the reported mishandling of student loan transfers by MOHELA, Nelnet and credit reporting agencies.

Full text of the letter to MOHELA is available here and below. MOHELA’s response to the November 2024 letter is available here.

Scott Giles

Executive Director and Chief Executive Officer

Higher Education Loan Authority of the State of Missouri (MOHELA) 633 Spirit Drive

Chesterfield, MO 63005

Dear Mr. Giles:

In November 2024, we wrote to you regarding the predatory Terms of Use (Terms) that the Higher Education Loan Authority of the State of Missouri (MOHELA) forces borrowers to sign when creating an account on its website.¹ The Terms appear intended to absolve MOHELA of liability for severe misconduct and potentially infringe upon borrowers’ legal rights. In your December 2024 response, you failed to offer a reasonable justification for MOHELA’s exploitative Terms and evaded many of our questions,² heightening our concerns regarding the Terms’ abusive, and possibly illegal, nature. In addition, you falsely asserted that MOHELA’s Terms align with industry standards, when in fact MOHELA’s Terms are significantly more restrictive than the website Terms of other federal loan servicers. MOHELA must immediately remove all predatory or potentially illegal provisions from its Terms of Use.

MOHELA has repeatedly shirked its basic responsibilities as a federal student loan servicer and has been repeatedly penalized by the Department of Education (ED) for doing so.³ In January 2025, ED released new data on federal loan servicer performance, revealing MOHELA as the worst servicer across all measures — with a customer satisfaction score below the threshold required by its federal contract.⁴ In light of this record, it is especially troubling that MOHELA requires borrowers to sign Terms that attempt to excuse MOHELA of its responsibilities at the expense of its customers.

MOHELA Has Failed to Justify Its Limitation of Liability

MOHELA’s Terms contain exploitative provisions that appear to undermine borrowers’ rights to hold MOHELA accountable for financial harms. The Terms assert that MOHELA “shall not be liable to the user” for “damages of any kind arising out of or in connection with your use of … any content on the website, even if MOHELA … was grossly negligent.”⁵ They further assert that a user’s “sole remedy for dissatisfaction with this website is to stop using this website and/or those services contained on this website” and that the “total liability of MOHELA to you for all claims arising from the use of this website is limited to one hundred dollars ($100).”⁶

MOHELA’s explanations fail to provide persuasive justifications for these provisions, especially in light of the very real damage that borrowers can suffer from inaccurate information.

MOHELA claims that “MOHELA’s Website Terms do not absolve MOHELA of all liability, just certain types of damages, and only to the extent permitted by law.”⁷ While that may be technically true, the plain text of the Terms tell the fuller story, stating that MOHELA “shall not be liable…for any loss of profits, loss of use, interruption of business, or any indirect, incidental or consequential damages of any kind arising out of or in connection with your use of, or inability to use, the website or any content on the website, even if MOHELA was advised of the possibility of such damages or was grossly negligent.”⁸ These Terms are clearly written and designed to absolve MOHELA of wide swaths of damages even in the cases of significant wrongdoing.

With respect to the other two liability provisions that we raised concerns about—which tell borrowers that they have no recourse against MOHELA other than to stop using its website, and that MOHELA cannot be liable for over $100 in damages related to the website—MOHELA provided no justification in its response.⁹

MOHELA Has Failed to Justify Its Disclaimer of Accuracy

MOHELA’s Terms also contain a provision disclaiming any responsibility that its website contains “accurate or reliable” information and for correcting any “defects” on the website.¹⁰ MOHELA’s excuses for this broad disclaimer—with serious potential to harm borrowers—are unconvincing.

First, MOHELA suggests that the presence of “other information such as employment opportunities and employee benefit[s]” on its website justifies the disclaimer because “MOHELA must keep the various types of content in mind when reviewing and modifying the Website Terms.”¹¹ This excuse provides no justification whatsoever for why MOHELA disclaims all responsibility for the accuracy of all information on the website, including information that is critical for borrowers serviced by MOHELA.

Second, MOHELA justifies its content provisions by stating that “[w]hile MOHELA seeks to make updates promptly, given the volume of information and time necessary to make revisions, that is not always possible.”¹² This excuse is also unconvincing. MOHELA places a finite amount of information on the website and is in control of the website’s content at all times. The company is not a small, mom-and-pop operation; it is a billion-dollar company that handles billions of dollars of student loans.¹³ The fact that MOHELA must update its website with information regarding student loans on a regular basis is no justification for a breathtakingly broad disclaimer of all responsibility for maintaining “accurate or reliable”¹⁴ information. Nor does it excuse MOHELA’s disclaimer of responsibility for correcting any “defects”¹⁵— regardless of the reasons for the inaccuracies or defects, including potential malfeasance or sheer incompetence by MOHELA.

MOHELA’s Restriction on Content Sharing Will Have a Chilling Effect on Borrowers

MOHELA’s Terms state that users may not “republish, publicly display, [or] distribute…website content,”¹⁶ suggesting that borrowers cannot share loan information from the website to seek assistance or raise concerns. While we appreciate that MOHELA’s response clarified that borrowers are allowed to share screenshots of the website, the Terms’ language does not make this clear. Contrary to MOHELA’s claim, this restrictive language is not located in a section that “pertains primarily to copyright matters;”¹⁷ there is no such section in the Terms. Further, MOHELA cites a clause permitting users to “view and/or print pages from the website for their personal use” as authorizing the sharing of information,¹⁸ but this clause does not make any allowances for sharing information from the website. At a minimum, MOHELA should update its Terms to clarify that borrowers may share information from the servicer’s website for personal use, including to seek assistance regarding their loans.

MOHELA’s Terms Are Inconsistent with Industry Standards

MOHELA also defends its Terms by arguing that they “are in accordance with industry standards, as well as of the standards of entities operating in the financial sector as a whole.”¹⁹ A review of the Terms of the three other major federal student loan servicers reveals that MOHELA’s claim is not accurate.²⁰

For example, two of the three other major federal loan servicers have website Terms asserting that they make “reasonable efforts” to keep website content up to date.²¹ In contrast, MOHELA makes no such promise in its Terms, instead disclaiming all responsibility to correct website errors or defects.²² Additionally, none of the other major federal student loan servicers claim that they cannot be held liable even if they were grossly negligent.²³ In fact, in most states, limitations of liability for gross negligence are not even legally enforceable.²⁴

Furthermore, two of the three other major federal loan servicers do not limit their liability to a specific dollar amount, and the third sets a liability cap five times as high as the cap set by MOHELA.²⁵ MOHELA is distinct in asserting that even if it is found liable in court, the servicer will only ever pay $100, despite the fact that many borrowers have been overcharged tens of thousands of dollars or more because of servicer errors.²⁶

Finally, MOHELA’s Terms assert that a borrower’s “sole remedy” for dissatisfaction is to stop using the servicer’s website.²⁷ No other major federal loan servicer’s website contains such a provision, which offers borrowers a choice they simply do not have—choosing a different federal servicer with a different website or refraining from using the internet to manage their student loans.²⁸ Even MOHELA’s call center directs borrowers to its website to obtain information and apply for certain programs.²⁹

MOHELA’s Terms May Be Unlawful

In our previous letter, we outlined several ways that MOHELA’s Terms may violate federal consumer protection law. MOHELA’s response did not address any of those concerns.

The Consumer Financial Protection Act (CFPA) prohibits abusive contracts, including those that take “unreasonable advantage” of “unequal bargaining power where, for example, consumers lack the practical ability to switch providers [or] seek more favorable terms.”³⁰ Borrowers whose loans are held by MOHELA are certainly subject to unequal bargaining power, since they cannot choose which federal loan servicer their loans will be assigned to. In addition, borrowers whose loans are serviced by MOHELA have no choice but to sign the Terms in order to access their loan information and sign up for repayment plans online.³¹ If the Terms’ gross negligence clause,

$100 liability cap, “sole remedy” clause, or any other provisions take “unreasonable advantage” of this unequal bargaining power, then the Terms may violate the CFPA.

The Terms also may violate the CFPA’s prohibition of deceptive practices, which encompasses “unlawful and unenforceable contract terms.”³² If any clauses of the Terms are unenforceable because they waive consumers’ rights or violate other consumer protections, then MOHELA could be found in violation of federal law. This could be true regardless of MOHELA’s disclaimers that the Terms only apply to the extent permitted by law, as the Consumer Financial Protection Bureau (CFPB) has asserted that such disclaimers do not absolve financial institutions of illegally requiring consumers to sign unenforceable terms.³³

Conclusion and Questions

MOHELA has imposed an exploitative set of Terms upon all borrowers that set up an account on its website. In the context of MOHELA’s consistently poor performance³⁴ as a federal loan servicer, your response indicates a worrying disregard for borrowers’ rights.

We ask that you immediately remove all predatory provisions from MOHELA’s Terms of Use, and that MOHELA make it clear in writing that it will not apply those provisions to any past users of the site. In addition, given your failure to respond to a number of our questions from our November letter, we again ask you to provide the following information by March 13, 2025:

1.     Did MOHELA notify ED’s Office of Federal Student Aid when first imposing the Terms on borrowers? If so, did this notification occur before or after MOHELA’s servicing website changed from www.mohela.com to mohela.studentaid.gov?

2.     Given that MOHELA operates a servicing website tied to the Office of Federal Student Aid’s main website (mohela.studentaid.gov), does MOHELA interpret the Terms it imposes on its own customers to supersede the more general and permissive terms of use imposed by the United States government for all users of studentaid.gov?³⁵

3.     When were the following clauses added to MOHELA’s Terms? Why did MOHELA add those clauses?

a.      “MOHELA … shall not be liable to the user or any third party for any loss of profits, loss of use, interruption of business, or any indirect, incidental, or consequential damages of any kind arising out of or in connection with your use of, or inability to use, the website or any content on the website, even if MOHELA was advised of the possibility of such damages or was grossly negligent.”

b.     “Your sole remedy for dissatisfaction with this website is to stop using this website and/or those services contained on this website.”

c.      “The total liability of MOHELA to you for all claims arising from the use of this website is limited to one hundred dollars ($100).”

4.     The Terms state that the “sole remedy” for a borrower’s “dissatisfaction” with MOHELA’s website is to stop using the website “and/or those services contained on this website.”³⁶ Given that millions of borrowers rely on MOHELA’s website to pay their student loans every month and to access up-to-date information on those loans, do you believe that this “sole remedy” is accessible to borrowers?

5.     How did MOHELA arrive at the $100 cap on liability for all claims arising from the use of its website? Has MOHELA paid any individual $100 under this provision of the Terms?

In addition, your response and our further examination of MOHELA’s Terms raise several additional questions, which we request that you respond to by March 13, 2025:

6.     MOHELA stated that its Terms were “carefully crafted” to enable it to take action against “third-party bad actors” and that “MOHELA has taken legal action against numerous third-party debt relief companies.”³⁷ Please list all instances in which MOHELA has taken such legal action. For each instance, please include the date when the legal action was initiated, the target of the legal action, the outcome (if applicable), and which clauses of the Terms enabled MOHELA to take legal action which MOHELA would not have had the authority to initiate otherwise.

7.     MOHELA stated that the Terms “do not absolve MOHELA of all liability, just certain types of damages, and only to the extent permitted by law.”³⁸ Please clarify what kinds of damages or liabilities related to MOHELA’s website the Terms do not absolve MOHELA of, other than those already not permitted by law.

8.     MOHELA stated that it has “had discussions with the U.S. Department of Education’s Office of Inspector General regarding potential enhancements to its Website Terms.”³⁹ Please describe the content of these discussions. What changes to MOHELA’s Terms, if any, did ED’s Office of Inspector General recommend? Has MOHELA implemented these changes?

9.     MOHELA wrote that “its Website Terms are in accordance with industry standards.”⁴⁰ Given that the $100 cap on liability, the clause limiting liability on gross negligence, the clause disclaiming responsibility for correcting errors, the lack of an assurance that MOHELA makes reasonable efforts to keep the website up-to-date, and the “sole remedy” clause are all uncommon or absent in the website Terms of other major federal loan servicers, how are MOHELA’s Terms “in accordance” with its peers?

10.  What actions, if any, has MOHELA taken to ensure that its Terms do not violate the CFPA’s prohibition of abusive contract terms or the CFPA’s rule against unenforceable contracts?

Thank you for your attention to this important matter.

Sincerely,

-30-