By Owen Daugherty, NASFAA Staff Reporter
Student loan servicer Navient announced this week that it will end its contract with the federal government and transfer all borrowers it is responsible for to a new servicer, pending approval from the Department of Education’s (ED) Office of Federal Student Aid (FSA).
Navient is currently the student loan servicer for about 6 million borrowers, all of whom will be transferred to Maximus, the current servicer for defaulted student loans, as Navient is the latest to exit the student loan servicing space.
“Navient is pleased to work with the Department of Education and Maximus to provide a smooth transition to borrowers and Navient employees as we continue our focus on areas outside of government student loan servicing,” Jack Remondi, president and CEO of Navient, said in a statement. “Maximus will be a terrific partner to ensure that borrowers and the government are well served, and we look forward to receiving FSA approval.”
Navient said it expects the contract to be finalized by the end of the year. Richard Cordray, chief operating officer of FSA, said his office has been monitoring contract negotiations between Navient and Maximus for some time and “is reviewing documents and other information from Navient and Maximus to ensure that the proposal meets all legal requirements and properly protects borrowers and taxpayers.”
Navient’s departure adds another obstacle FSA and ED must clear as they seek to transition millions of borrowers into repayment when the federal forbearance period comes to an end in January 2022.
Navient is the third servicer in as many months to announce it won’t continue its relationship as a student loan servicer with the federal government, following the Pennsylvania Higher Education Assistance Agency (PHEAA) and the New Hampshire Higher Education Association Foundation (NHHEAF), which operates as Granite State Management & Resources. Both announced over the summer they would not extend their servicing contracts at the end of the year, impacting nearly 10 million borrowers.
In total, the departures mean as many as 16 million borrowers could be under new servicers in the coming months as payments are set to resume after nearly two years without them, leading many to worry about the confusion borrowers could experience.
Before Navient’s announcement, NASFAA spoke with experts about how the process of moving a significant portion of borrowers to new servicers creates an additional hurdle for the department to contend with as it aims to ensure that borrowers are successfully put into repayment.
Publication Date: 9/30/2021