Major student loan provider Navient (NAVI) is shutting down federal services business, the company announced on Tuesday, and is handing its 5.5 million borrowers, who hold approximately $ 280 billion in federal student loans, to another provider, Maximus.
Lawyers and progressive lawmakers, led by Senator Elizabeth Warren (D-MA), announced the move in light of Navient’s strained relationship with the federal government’s consumer protection agencies.
The exit, however, presents another challenge as the Department of Education (ED) tries to end the student loan payment hiatus in January – especially after four other service providers quit last year.
“Even in the best of circumstances, this is a monumental task,” Persis Yu, director of the National Consumer Law Center’s Student Loan Support Project, told Yahoo Finance. “It is a process that has to be managed very slowly and consciously. [and] I have many concerns as to whether or not this is actually possible in the schedules available to us. “
“Must have hand in hand for this entire process”
With Navient’s announcement, around 16.3 million student loan borrowers will get a new loan service provider in 2022.
The Pennsylvania Higher Education Assistance Agency – which services approximately 8.5 million student loan borrowers – and Granite State – which services approximately 1.3 million borrowers – both announced they would be hiring in July. The Utah Higher Education Assistance Authority, which was withdrawn in October 2020, served around 1 million student loan borrowers.
The departures come as the majority of the 43 million US student loan borrowers have to repay their loans. Payments have been on hold since March 13, 2020 with no interest, with the Biden government recently extending the hiatus to January 31, 2022.
Proponents expressed deep concern about the transfer process given the short timeframe between October and February 2022. The US government, with trillions of dollars in student loan debt, has already expressed the need to carefully manage the end of the debt break.
Aside from Navient’s departure, these transitions will be difficult, especially given the uncertainty about whether the service providers “have the manpower to handle the influx of borrowers who will be confused and need to hold hands in 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 “to make sure the proposal is all legal Meets requirements and “properly protects borrowers and taxpayers.”
“Company behind the scenes”
For its part, Maximus has announced its intention to provide quality service to student loan borrowers with the end of the payment hiatus. Maximus spokeswoman Eileen Cassidy Rivera said in a statement to Yahoo Finance the company was “committed to ensuring a seamless transition for student loan borrowers” and helping borrowers cope with the repayment start-up from 2022.
However, Yu and other proponents also expressed concern that, while Maximus has been a government contractor over the years, it has largely disappeared from the public eye and does not offer the same services as Navient.
To date, Maximus has been collecting and managing debt for ED, according to a blog post by the Student Borrower Protection Center (SBPC). And not many borrowers are aware of the company’s existence, Yu said.
“Maximus is a company that hasn’t had much public scrutiny. It is a servicer, but it does not perform the functions that Navient, [the Pennsylvania Higher Education Assistance Agency], and so do the rest, “Yu said. So we don’t have a track record of helping borrowers manage income-based repayment.”
And since she is a very “behind the scenes” company, she adds, “It is worrying that Navient can simply pick his replacement and pick someone who is out of the public eye and has no track record.”
Navient has long been in the crosshairs of attorneys and progressive lawmakers who believed the company was responsible for shoddy operations, such as steering student borrowers into expensive repayment plans or fraudulent practices from New Jersey to Washington.
His departure was welcomed.
“Navient has spent decades misleading, defrauding, and abusing student borrowers. The state student loan program will be much better off without them, “Senator Elizabeth Warren (D-MA) said in a statement.
“Ultimately, the student loan system is broken,” she continued. “The only way to ensure borrowers do not face the same predatory behavior as Navient’s detachment is to cancel the student debt so that a borrower’s future is not held captive by the companies that benefit.” . “
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.
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