Military Member On Duty Sent to Collection for Student Loans

“Dear Steve,

I am duty military and I was deployed overseas for about four years as a training instructor to foreign military. Before I went oversea I contacted Mohela and I was told that my loans would be deferred.

To make a long story short that wasn’t the case my loans had defaulted without my knowledge. I contact Mohela and sent them the information from the military stating I was deployed at the time, they petty much told me there was nothing I could do it was too late and that I needed to work with the collection company.

My goal is the have my loans reversed from default. This is not an attempt to negate my responsibility for my student loan quite the opposite, I shouldn’t be punished for my military service.

What are my options?


Dear Mark,

I believe what you are thinking is that the Servicemembers Civil Relief Act (SCRA) would provide you with protection from unfair financial actions during your period of deployment.

If you were on active duty the Servicemembers Civil Relief Act would provide you with certain protections. You can read the full documentation on this law, here.

And if there is any concern over your official military status at the time, you can obtain a free certification document about your military status, here.

There appears to be some confusion about what Mohela agreed to do. Under the SCRA, once you made a written request for protection under SCRA the lender would then reduce your loan interest rate to 6 percent for the duration of your active duty service.

If you had been sued over a default of your student loans while on active duty you would be protected from a default judgment and/or set it aside.

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However I am unaware of any protection under the SCRA that would allow you to simply not make payments while you were gone. If Mohela agreed to that it sounds as if it would have been something they offered and not part of your military service financial protection.

See also  MOHELA - CFPB Complaint 2017-04-24

So it sounds like you believed you would not have to make any payments while deployed and were surprised when your loan was labeled as defaulted and sent to outside collections. But you were not sued over the loan so there is no SCRA protection there. One potential issue is how the current loan balance claimed might have been calculated at a rate higher than 6 percent. If so the balance due should be recalculated during the period of your active duty.

As far as working with the collection company, it seems reasonable to work with them to come up with a solution and payments that prevent you from being sued now that you are off active duty.

Since I don’t know what branch of the military you are with I can refer you to your service ombudsman office for more help.

If you want to pursue this further because you feel Mohela treated you unfairly, you should file a complaint with the Consumer Financial Protection Bureau over your situation.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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