Embattled Navient Says It Doesn’t Serve State Student Loans; Share down 10%
Another large federal student loan company is going out of business.
Navient Inc. of Wilmington has negotiated to transfer more than five million state student borrowers to Maximus, Reston, Virginia, the company that manages state and federal health and welfare programs.
Navient – the source of thousands of complaints to the Consumer Financial Protection Bureau about its state student loan services – said it expects the US Department of Education to approve the deal by Jan. 1.
Federal student loan borrowers are expected to resume payments in February 2022 after a hiatus due to the pandemic. If so, borrowers who have paid Navient once will have payments processed by Maximus instead.
Navient stock fell sharply on Wednesday, falling $ 3.11, or nearly 14%, to close at $ 19.24. The company announced that it will be exiting the state loan service after the market closes on Tuesday.
Navient’s actions come as the Biden government attempts to reform the student loan service business. Critics say the organizations benefit borrowers young and older alike as they struggle with college debt. Richard Cordray, the first director of the Consumer Financial Protection Bureau, the agency created after the subprime mortgage crisis, was named Chief Operating Officer of Federal Student Aid earlier this year in the Department of Education, which oversees the service providers.
FedLoan, part of the Pennsylvania Higher Education Assistance Agency (PHEAA) in Harrisburg, announced last summer that it would also be shutting down its state student loan service business after US Senator Elizabeth Warren, Massachusetts, PHEAA CEO James Steeley for Targeted her committee allegedly misled at a public hearing in April. In July, FedLoan said it would not renew its federal loan service contract when it expires this December.
FedLoan and Navient serve around 15 million student loan borrowers nationwide who owe $ 648 billion, federal data shows. You have administrative offices or call centers in Delaware, Pennsylvania, and Indiana.
“Several hundred employees work on the processing of federal student loans and we assume that these employees will switch to Maximus,” said a Navient spokesman on Tuesday.
FedLoan has said it is inevitable that there will be downsizing, but the Harrisburg agency also expects it will downsize through brain drain. A FedLoan spokesman did not immediately respond to a question about the federal student loan deal’s transition to a new organization.
“Navient is excited to work with the Department of Education and Maximus to help borrowers and Navient employees make a smooth transition while we continue to focus on areas outside of government student loan administration,” said Jack Remondi, President and CEO of Navient, in a statement . “Maximus will be a great partner in ensuring that borrowers and the government are well served and we look forward to receiving that [Education Department] approval.”
Navient says the federal student loan service contract is a small part of his corporate empire in Wilmington. The company reported revenues of $ 34 million for the quarter ended June 30 for the federal student loan agreement through the Department of Education. His other businesses include private college loans and contracts to assist states with unemployment benefit processing, contact tracing, and vaccine administration services.
Teresa Weipert, Maximus General Manager, Federal Services Business, said, “This contract allows Maximus to use our deep understanding of the needs of student borrowers and our industry-leading customer service to assist [the Education Department] To successfully serve millions of student loan borrowers. “
Seth Frotman, executive director of the nonprofit Student Loan Protection Center and former student loan industry top watchdog at the Consumer Financial Protection Bureau, said Navient should still be held accountable for previous abuses.
Navient has paid shareholders more than $ 4.4 billion through dividends and share buybacks, according to filings with securities regulators.
Since 2011, tens of thousands of borrowers have filed complaints with Navient, the Consumer Financial Protection Bureau, and other government agencies about obstacles they faced in repaying student loans from Navient.