MoneyDon't Waste Your Money


Student loan servicer shuts down, graduates left in default

Mission Hills shutdown leaves graduates on the hook for money
Posted at 12:21 PM, Jan 27, 2020

Karen Morris pays all her bills on time. Unfortunately, that may not have helped in the case of her student loan.

The college graduate recently received a letter from the FTC informing her that it's freezing the assets of her student loan servicing company, Mission Hills Federal of San Diego.

"The Federal Trade Commission was closing them down because they say it was a student loan scam," she said.

The FTC claims Mission Hills took in more than $23 million from college grads like Morris, but then allegedly kept the money and failed to repay their student loans.

But that's not the worst part. Now the US Department of Education told Morris that it would take her tax return or garnish her wages to get the money she owes.

"Now Student Loans wants to take my tax return because I owe $2,000, and they are going to take my tax return this year," she said.

Warning signs of a loan servicing scam

It's not an isolated case.

Loan servicing scams and loan forgiveness scams target thousands of students every year. But there are ways for college students to protect themselves f from a shady loan company.

So, what are the warning signs that a loan company may not be on the up and up? says warning signs of a loan repayment scam are:

  • Upfront fees to service your student loan
  • Promises of loan forgiveness (it is very hard to have a loan completely forgiven)
  • A company that advertises on social media
  • A company that has a high number of complaints when Googling its name

Jim Bradshaw, a spokesperson for the Department of Education, said the department is reviewing Morris' case to see if anything can be done.

The Federal Trade Commission (FTC) says it's unclear if victims of the scam will get their money back.

"We are mid-litigation so it is unclear yet whether we'll end up returning money to consumers or what the outcome of our lawsuit will be," FTC spokesperson Nicole Drayton said.

Calls to MIssion Hills went to a generic voicemail, and messages were not returned.

Morris says it's not right that college grads who thought they were paying off their loans may now be penalized for the wrongdoing of the loan service company they trusted.

"No, it's not fair," she said. "I was doing what I was supposed to do and paying my student loans back every month. That was my agreement."

She hopes someone else honors the agreement, or she will have no tax refund this year. As always, don't waste your money.


Don't Waste Your Money" is a registered trademark of Scripps Media, Inc. ("Scripps").

Like" John Matarese Money on Facebook

Follow John on Twitter (@JohnMatarese)

For more consumer news and money-saving advice, go to