Navient, the largest student loan company in the United States, has announced plans to end its loan service.
This announcement is awaiting government approval.
Navient serves 12 million borrowers and is the third company to announce its intention to terminate its contract.
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Navient, the country’s largest student loan company, said Tuesday it is seeking government approval to end its service contract.
According to a press release, the six million borrowers who currently pay their federal student loans to Navient will be transferred to Maximus, a government loan management company. It is the third company to announce plans to end lending service this year – the Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources – serving a total of 10 million borrowers, also end of their contracts.
“Navient is pleased to work with the Department of Education and Maximus to ensure a smooth transition for borrowers and Navient employees as we continue to focus on areas other than government student loan servicing,” said Jack Remondi, President and CEO of Navient, said in a statement. . “Maximus will be a great partner in ensuring borrowers and government are well served, and we look forward to receiving FSA approval.”
Richard Cordray, director of the Federal Student Aid Office (FSA), said in a statement that the FSA was reviewing documents from both companies to “ensure the proposal meets all legal requirements and properly protects borrowers and taxpayers “. It is not known when the Ministry of Education will approve this request.
Remondi wrote in a blog post that Navient and Maximus had both worked with the education department over the past few months to ensure a smooth transition for borrowers, saying he was “confident that borrowers will continue to make the transition. ‘be well served’ during and after the transition. .
This will likely be good news for lawmakers like Massachusetts Senator Elizabeth Warren, who has held Navient in her sights for years and accused him of misleading borrowers. Insider reported in April that during a student debt hearing, Warren told Remondi he should be fired for “actions that scammed borrowers,” including improper marketing of loans and failure to inform the borrowers of their rights.
And Student Borrower Protection Center executive director Seth Frotman said in a statement that “millions of Americans with student loans will no longer be forced to depend on a company that puts its own profits at the expense of its customers.” .
Notably, Cordray said during remarks at a conference earlier this month that student loan companies are choosing to shut down rather than face greater liability. Granted, he didn’t comment on specific companies, but noted that “not everyone is happy” with his plans to step up oversight of the industry.
If Navient’s request to terminate his contract is approved, it will likely increase the administrative burden for the education department in February. Student loan payments have been suspended for the duration of the pandemic, and the ministry will need to restart these payments for the 43 million borrowers on federal student loans, as well as the transition of 16 million borrowers to new companies. student loans.
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