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Senior student loan manager Navient (NAVI) is leaving the federal services firm, the company said on Tuesday, handing over its 5.5 million borrowers with about $ 280 billion in federal student loans to Maximus, another manager.
Advocates and progressive lawmakers led by Senator Elizabeth Warren (D-MA) announced the move, in light of Navient’s difficult relationship with federal government consumer protection agencies.
But the departure adds another challenge as the Department of Education (ED) seeks to end the January student loan payment hiatus – especially after the departure of four other duty officers in the past year.
“Even under the best of circumstances, this is a monumental task,” Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, told Yahoo Finance. “It is a process that must be managed very slowly and deliberately, [and] I have a lot of concerns as to whether or not this can be done within the time frame that we have. “
“Need to have a grip on this whole process”
With Navient’s announcement, approximately 16.3 million student loan borrowers will have new loan service in 2022.
The Pennsylvania Higher Education Assistance Agency – which serves about 8.5 million student loan borrowers – and Granite State – which serves about 1.3 million borrowers – have both decided to pull out in July. The Utah Higher Education Assistance Authority, which withdrew in October 2020, has served around 1 million student loan borrowers.
The departures come as the majority of the 43 million student loan borrowers in the United States have to start repaying their loans again. Payments have been on hold, without interest, since March 13, 2020, with the Biden administration recently extending the break until January 31, 2022.
Advocates have expressed deep concern about the transfer process, given the short delay between October and February 2022. The US government, which holds billions of dollars in student loan debt, has already expressed that the end of the hiatus from payment should be carefully managed.
Aside from Navient’s departure, these transitions are going to be tricky, especially given the uncertainty over whether the departments “have the staff capacity to handle the influx of borrowers who are going to be confused and need help. ‘have control over this whole process,’ said Yu.
Richard Cordray, chief operating officer of Federal Student Aid, which manages the trillion-dollar student loan portfolio, said in a statement that his agency is still reviewing documents and information from Navient and Maximus “for s. ensure that the proposal meets all legal requirements and adequately protects borrowers and taxpayers.
“Company behind the scenes”
Maximus for his part expressed his intention to provide high quality service to student loan borrowers with the end of the payment break. Maximus spokeswoman Eileen Cassidy Rivera said in a statement to Yahoo Finance that the company is “committed to ensuring a smooth transition for student loan borrowers” and to helping borrowers manage the rebound in the economy. reimbursement from 2022.
But Yu and other advocates have also expressed concern that Maximus, despite being a government contractor over the years, has been largely out of the public eye and not providing the same. services that Navient.
Maximus has so far handled collection and debt management for ED, according to a blog post from the Student Borrower Protection Center (SBPC). And few borrowers are aware of the existence of the business, Yu said.
“Maximus is a company that has not been the subject of close public scrutiny. It is a servicer, but it does not perform the functions that Navient, [the Pennsylvania Higher Education Assistance Agency], and others do, ”Yu explained.“ So we don’t have a track record of how this helps borrowers navigate income-based repayment.
And being a very ‘behind the scenes’ company, she added, “it is concerning that Navient may just choose his replacement and pick someone who is not in the public eye and who has no ‘antecedents’.
Navient’s problems
Navient has long been in the crosshairs of progressive advocates and lawmakers who believed the company was responsible for poor service, such as steering student loan borrowers towards expensive repayment plans or deceptive practices. from New Jersey to Washington.
His departure was greeted.
“Navient has spent decades deceiving, cheating and abusing student borrowers. The federal student loans program will be much better off without them, ”Senator Elizabeth Warren (D-MA) said in a statement.
“At the end of the day, the student loan system is broken,” she continued. “The only way to ensure that borrowers don’t face the same predatory behavior from Navient’s replacement is to write off student debt, so that no borrower is held hostage by companies that take advantage of them. financial distress.
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Aarthi is a reporter for Yahoo Finance. She can be contacted at [email protected]. Follow her on Twitter @aarthiswami.
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