Navient Joins Student Loan Servicers Leaving the Federal Loans Business
As borrowers make plans to resume making student loan payments in February, they may have questions about who will be servicing those loans. We learned earlier this year that two large student loan servicers—PHEAA and Granite State—would no longer service federal student loans. The former, through its subsidiary FedLoan, is responsible for all borrowers pursuing Public Service Loan Forgiveness, a program that has been under intense scrutiny throughout the student debt crisis. Just last month, yet another major servicer—Navient— announced that it would no longer manage federal loans, transferring them to another company.
Why Are Companies Getting Out of this Enormous Market?
With the enormity of student loan debt in this country—totaling over $1.7 trillion dollars—one would think there’s a lot of money to be made servicing it. These companies, however, say otherwise: they claim that student loan programs “have grown increasingly complex and challenging while the cost to service those programs increased dramatically.” While this may be true, they don’t seem to be wanting for profit—CEO Jack Remondi of Navient still managed to make $7.8 million in company pay in 2018—so what’s the real reason for these departures?
Student Loan Servicers and Public/Government Scrutiny
Student loan servicers have consistently been in the public eye for the past couple of years and never for positive reasons. Organizations like the Consumer Financial Protection Bureau and politicians like Sen. Elizabeth Warren—who helped found it—have doggedly followed these companies, scrutinizing their business practices, and frequently dragging them to court for consistently abusing their customers. Navient, one of the largest student loan servicers, was one of Sen. Warren’s first targets, and has been sued for millions of dollars for offences. Richard Cordray—head of the Education Department’s Student Loan office and former head of the CFPB—posits that servicers would rather abandon ship than face further government investigation. While advocates are celebrating these departures, borrowers remain unsure what will come next, despite reassurances from the servicers.
How to Prepare as Your Loan Servicer Changes
If you’re affected by these changes to the student loan service landscape, you’re not alone: millions of borrowers are in the same boat! Check out our earlier post for PHEAA/FedLoan borrowers—it has a lot of info on what you can do to prepare yourself for your loan servicer to change. The most important thing is not to panic: you have time before any of this takes effect. In the meantime, we’re here for you! If you have any questions or concerns about your situation, please don’t hesitate to reach out to Joy.