Why Navient has abandoned your student loans

Here’s why Navient has waived your student loans.

Here is what you need to know.

Student loans

In a major announcement, Navient, which manages roughly $ 300 billion in private and federal student loans for 12 million student loan borrowers, announced yesterday that it will stop managing federal student loans. (Here’s what that means for your student loans). The surprise announcement – days before a possible government shutdown – means six million student loan borrowers will have new student loan service in the coming months. This new student loan manager – who collects student loan payments and manages customer service for student loans – may be a company called Maximus, with whom Navient has signed a novation agreement to transfer the service. Why did Navient decide to stop managing federal student loans? Here are 3 potential reasons why:

1. Student loans: supervision of Federal Student Aid

The Biden administration is reorganizing student loans from every angle. U.S. Education Secretary Miguel Cardona and President Joe Biden want to simplify student loan repayments, offer more student loan cancellations, and increase transparency so student loan borrowers are fairly shaken up. With the appointment of Richard Cordray as COO of Federal Student Aid (FSA), student loan managers will be held to a higher standard. Cordray, who headed the Consumer Financial Protection Bureau (CFPB) and served as Ohio’s attorney general, said the FSA would increase oversight of student loan managers who fail to meet their obligations to serve student loan borrowers. As the federal manager of student loans, Navient would fall under this oversight. Coming out of his contract with the federal government, Navient would no longer take center stage, at least for the federal student loans department.

2. Student loans: congressional control

The Department of Education is not the only institution in Washington that regulates student loan services. Members of Congress have an interest in ensuring equity for student loan borrowers. Senator Elizabeth Warren (D-MA), who helped create the CFPB and is a consumer and student loan cancellation champion, sharply criticized Navient as a student loan manager. Warren accused Navient of misleading student loan borrowers and “stealing from taxpayers.” According to Warren, among other complaints filed with the student loan manager, Navient overcharged the Education Department by about $ 22.3 million after the manager falsely claimed special allowance payments for ineligible student loans. If Navient continued to manage federal student loans, it’s likely that Warren would continue to use Navient as a model on how not to repay student loans. By transferring its federal student loan portfolio to Maximus, which is subject to Department of Education approval, Navient can somewhat escape congressional oversight for its federal student loans department.

3. Student loans: CFPB monitoring

The US Department of Education and Congress aren’t the only institutions that regulate student loan services like Navient. The CFPB has also been at the forefront of consumer protection. In 2017, the CFPB sued Navient, alleging that, among other allegations, Navient “systematically and illegally [failed] borrowers at each stage of repayment ”, in particular:

  • created barriers to reimbursement by providing incorrect information;
  • process payments incorrectly;
  • did not act when borrowers complained;
  • illegally deceived many troubled borrowers of their rights to lower payments, causing them to overpay their student loans;
  • deceived private student loan borrowers about the requirements to release their co-signer from the loan; and
  • damaged the credit of borrowers with disabilities, including seriously injured veterans

The CFPB also alleged that Navient improperly directed student loan borrowers into student loan forbearance when those borrowers might otherwise have qualified for income-tested repayment plans. Navient has denied the allegations publicly and in court records.

4. Student loans: control by state attorneys general

Navient has come under the microscope of state attorneys general from Massachusetts to Pennsylvania to California, who have enforced consumer protection laws. For example, New Jersey Attorney General Gurbir S. Grewal filed a lawsuit last year in New Jersey Superior Court alleging that Navient “engaged in unreasonable business practices, deceptive behavior and abuses. misrepresentation when serving thousands of New Jersey consumers’ student loans. New Jersey alleged that Navient encouraged student loan borrowers to choose forbearance over income-driven repayment plans, which could have saved student loan borrowers more money. Navient disputed the claims, calling them “unsubstantiated recycled claims”. Earlier this year, a Washington state judge found that Navient had cheated on student loan borrowers and their co-signers who sought to be released from their student loans. Washington Attorney General Bob Ferguson says the judge’s order says Navient engaged in deceptive practices regarding his co-signer release policy; Navient violated the Consumer Protection Act; Navient urged the release of co-signers for private student loans, but misrepresented the way Navient implemented the program; and Navient did not disclose that it was difficult to obtain co-signer authorization. Navient said his disclosures were “clear and fairly enforced under Washington state law.”

Student loans: the rest

What’s the next step for your student loans? One of the main reasons Navient is leaving the federal student loans department is to avoid the spotlight of regulatory oversight. Navient will continue to manage private student loans, making Navient still susceptible to regulatory oversight in the normal course of federal and state governments. Navient can limit any potential exposure, but clearly will not become immune. However, in transferring its federal student loan service, Navient may have chosen to exit the stage before the Department of Education either renewed Navient’s federal contract or implemented a stricter enforcement of loan services. student. If the Education Department approves the transfer, Maximus could take over the administration of federal student loans for student loan borrowers that Navient has already insured. If the Education Department does not approve the transfer to Maximus, the Education Department would reassign student loan borrowers to another student loan manager. Although the Ministry of Education has not made a final decision or announced a deadline for a new service, expect the Ministry of Education to communicate in writing the next steps for all loan borrowers. students who have already worked with Navient.

In the meantime, continue to make normal student loan payments, or if you choose not to make student loan payments due to the temporary student loan relief under the Cares Act, remember that your federal student loan repayments will resume on February 1. , 2022.

Here are some popular ways to save money with your student loans:

Student loans: related reading

How to get approved for a student loan forgiveness

Student loan cancellation will not be available to these borrowers

Student loan cancellation won’t be available to everyone, but this plan is available now

How to get a student loan forgiveness

About Judith J. George

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