Student loans can be a great way to finance your education, but they also come with responsibilities and challenges. If you have borrowed student loans from the Higher Education Loan Authority of the State of Missouri (MOHELA), one of the largest holders and servicers of student loans in the United States1, you need to be aware of some common mistakes that borrowers make when repaying their loans, and how to avoid them. In this article, we will cover the following topics:
What is MOHELA and why does it matter?
MOHELA is a not-for-profit organization that was created in 1981 by the Missouri General Assembly to provide access to higher education for Missouri residents. MOHELA administers and services various types of student loans, including federal loans, state loans, and private loans. MOHELA is also one of the nine servicers contracted by the U.S. Department of Education to manage federal student loans under the Direct Loan Program.
If you have borrowed student loans from MOHELA, or if your loans have been transferred to MOHELA by the Department of Education, it matters because MOHELA is responsible for sending you monthly statements, collecting your payments, reporting your payment history to credit bureaus, providing customer service, and offering various repayment options and benefits. Therefore, you need to maintain a good relationship with MOHELA and communicate with them regularly about your loan status and any changes in your situation.
How to update your contact information with MOHELA?
One of the most common mistakes that borrowers make is not updating their contact information with MOHELA, which can lead to missed communications and late payments. If you move, change your phone number, email address, or bank account, you need to inform MOHELA as soon as possible, so that they can send you important notices and reminders about your loans. You can update your contact information online through your MOHELA account, by phone at 1-888-866-4352, or by mail at:
MOHELA 633 Spirit Drive Chesterfield, MO 63005-1243
You should also opt for electronic communications and notifications from MOHELA, which are faster, more convenient, and more environmentally friendly than paper mail. You can sign up for e-statements, e-correspondence, and e-alerts through your MOHELA account or by calling 1-888-866-4352.
How to choose the right repayment plan for your situation?
Another common mistake that borrowers make is not choosing the right repayment plan for their situation, which can result in higher interest charges or longer repayment periods. Depending on the type and amount of your loans, you may have different repayment options available, such as:
- Standard Repayment Plan: This is the default plan for most federal loans, where you pay a fixed amount every month for up to 10 years.
- Graduated Repayment Plan: This is a plan where you start with lower payments that increase every two years for up to 10 years. This may be suitable for borrowers who expect their income to grow over time.
- Extended Repayment Plan: This is a plan where you pay a fixed or graduated amount every month for up to 25 years. This may be suitable for borrowers who have a large loan balance and need lower monthly payments.
- Income-Based Repayment Plan (IBR): This is a plan where you pay a percentage of your discretionary income every month for up to 20 or 25 years, depending on when you borrowed your loans. This may be suitable for borrowers who have a low income or high debt-to-income ratio.
- Income-Contingent Repayment Plan (ICR): This is a plan where you pay the lesser of 20% of your discretionary income or what you would pay under a 12-year fixed plan every month for up to 25 years. This may be suitable for borrowers who have a low income or high debt-to-income ratio.
- Income-Sensitive Repayment Plan: This is a plan where you pay a percentage of your monthly income every month for up to 15 years. This may be suitable for borrowers who have Federal Family Education Loan (FFEL) Program loans that are not eligible for IBR or ICR.
- Pay As You Earn Repayment Plan (PAYE): This is a plan where you pay 10% of your discretionary income every month for up to 20 years. This may be suitable for borrowers who are new borrowers as of October 1, 2007, and have a partial financial hardship.
- Revised Pay As You Earn Repayment Plan (REPAYE): This is a plan where you pay 10% of your discretionary income every month for up to 20 or 25 years, depending on the type of your loans. This may be suitable for borrowers who have any type of Direct Loan and have a partial financial hardship.
To compare different repayment plans and use online calculators to estimate your monthly payments and total interest charges, you can visit the MOHELA website or the Federal Student Aid website. You can also contact MOHELA at 1-888-866-4352 to discuss your options and request a change in your repayment plan.
How to take advantage of deferment or forbearance options when facing financial hardship?
Another common mistake that borrowers make is not taking advantage of deferment or forbearance options when facing financial hardship, which can help prevent default and negative credit impact. Deferment and forbearance are temporary pauses in your loan payments that may be granted under certain circumstances, such as:
- Economic hardship
- Military service
- Medical or dental internship or residency
- Enrollment in school or rehabilitation program
- Natural disaster or national emergency
Deferment and forbearance are not automatic, and you need to apply for them through MOHELA by submitting the required forms and documentation. You can find the forms and instructions on the MOHELA website or by calling 1-888-866-4352. You should also continue making your payments until you receive a confirmation from MOHELA that your request has been approved.
The main difference between deferment and forbearance is that interest may or may not accrue on your loans during deferment, depending on the type of your loans, but interest will always accrue on your loans during forbearance. Therefore, you should try to pay at least the interest on your loans during deferment or forbearance, if possible, to avoid increasing your loan balance.
How to apply for income-driven repayment plans or loan forgiveness programs if eligible?
Another common mistake that borrowers make is not applying for income-driven repayment plans or loan forgiveness programs if eligible, which can reduce monthly payments or cancel some or all of the loan balance. Income-driven repayment plans are plans that adjust your monthly payments based on your income and family size, and may forgive any remaining balance after 20 or 25 years of qualifying payments. Loan forgiveness programs are programs that forgive some or all of your loan balance after you meet certain criteria, such as working in public service, teaching in low-income schools, or serving in the military.
To apply for income-driven repayment plans, you need to submit an online application through the Federal Student Aid website or a paper application through MOHELA. You will also need to provide proof of your income and family size, and recertify them every year. To apply for loan forgiveness programs, you need to submit the appropriate forms and documentation through MOHELA. You can find more information about the eligibility requirements and application process for each program on the MOHELA website or the Federal Student Aid website.
By applying for income-driven repayment plans or loan forgiveness programs, you can lower your monthly payments, save money on interest, and potentially have some or all of your debt forgiven. However, you should also be aware of the possible drawbacks, such as paying more interest over time, extending your repayment period, having to pay taxes on the forgiven amount, and losing some benefits if you consolidate your loans.
How to check your loan account regularly for errors or discrepancies?
Another common mistake that borrowers make is not checking their loan account regularly for errors or discrepancies, which can affect their loan balance and payment history. You should review your loan account at least once a month through your MOHELA account or by calling 1-888-866-4352. You should look for any errors or issues such as:
- Incorrect loan amount, interest rate, or fees
- Missing or misapplied payments
- Incorrect payment due date or amount
- Incorrect repayment plan or status
- Unauthorized changes or transactions
If you find any errors or issues with your loan account, you should report them to MOHELA as soon as possible by phone at 1-888-866-4352, by email at firstname.lastname@example.org, or by mail at:
MOHELA Attention: Customer Advocate 633 Spirit Drive Chesterfield, MO 63005
You should also keep copies of all your correspondence and documentation with MOHELA for future reference. If you are not satisfied with MOHELA’s response or resolution, you can escalate your complaint to the Department of Education’s Federal