Navient, the US's largest student-loan provider, has announced that it will cease servicing loans.
This announcement is subject to approval by the government.
Navient serves 12 million borrowers, and is the third company that has announced plans to terminate its contract.
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Navient, the nation's largest student-loan provider, announced Tuesday that it will seek government approval to terminate its servicing contract.
A press release stated that six million federal student loan borrowers who are currently paying Navient their federal student loans will be transferred to Maximus. Maximus is a government loan servicing agency. This is the third company that announced plans to terminate loan servicing in this year's fiscal year. The Pennsylvania Higher Education Assistance Agency, (PHEAA), and Granite State Management and Resources, which served a total of 10 million borrowers, also ended their contracts.
"Navient is happy to work with Maximus and the Department of Education to provide a smooth transition for borrowers and Navient employees, as we continue to focus on areas other than government student loan servicing," Jack Remondi (Navigent President and CEO) said in a statement. Maximus will be an excellent partner to ensure that both borrowers and government are well-served, and we look forward receiving FSA approval.
Richard Cordray, director of Federal Student Aid (FSA), stated in a statement, that FSA was reviewing documents from both companies "to ensure that the proposal meets all legal obligations and properly protects taxpayers and borrowers." This request is not yet approved by the Education Department.
Remondi stated in a blog that Maximus and Navient have been working together with the Education Department over recent months to ensure smooth transitions for borrowers. He said he is confident that borrowers will be well-served during and after the transition.
Massachusetts Senator Elizabeth Warren will be pleased to hear this news. She has had Navient in her sights since the beginning and accused it of misleading borrowers. Insider reported that Warren said to Remondi in April, during a hearing about student debt that he should be fired because of "actions that stole off borrowers," which included improperly marketing loans and failing notify borrowers of their rights.
Seth Frotman, Executive Director of Student Borrower Protection Center, stated in a statement that "millions" of Americans with student loans won't be forced to rely upon a company that makes its profits at the expense its customers.
Cordray stated that student-loan firms are opting to close down than face greater accountability during his remarks at a conference earlier in the month. Cordray did not mention specific companies, but he noted that "not everyone was thrilled" about his plans to improve oversight.
If Navient's request for a termination of its contract is granted, it will likely increase the administrative burdens that the Education Department will have to deal with in February. The department will need to restart student-loan payments for 43 million borrowers who have federal student loans. Also, transition 16 million borrowers for new student-loan firms.
