Embattled Navient says it will not serve federal student loans; shares drop 10% | Business
September 29 â Another major federal student loan manager leaves the company.
Navient Inc., of Wilmington, negotiated the transfer of more than five million federal student loan borrowers to the Maximus Corporation of Reston, Va., Which administers state and federal health and social services programs.
Navient – the source of thousands of complaints with the Consumer Financial Protection Bureau about its federal student loan service operations – said it expects the U.S. Department of Education to approve the deal. ‘by January 1.
Federal student loan borrowers are expected to resume their payments in February 2022 after a hiatus due to the pandemic. When they do, borrowers who have already paid Navient will have their payments processed by Maximus.
Navient stock fell sharply on Wednesday, falling $ 3.11 or nearly 14% to close at $ 19.24. The company said it will be pulling out of the federal loan management business after the exchange closed on Tuesday.
Navient’s action comes as the Biden administration seeks to reform the business of managing student loans. Critics say organizations are taking advantage of young and older borrowers struggling with college debt. Richard Cordray, the first director of the Consumer Financial Protection Bureau, the agency created after the subprime mortgage crisis, was named earlier this year director of operations for Federal Student Aid at the Department of Education, which oversees the servers .
FedLoan, which is part of the Pennsylvania Higher Education Assistance Agency (PHEAA) in Harrisburg, announced last summer that it would also give up its federal student loan management business after U.S. Senator Elizabeth Warren (D., Mass .) targeted PHEAA CEO James Steeley for allegedly misleading his committee during a public hearing in April. In July, FedLoan said it would not renew its federal loan service contract when it expires in December.
FedLoan and Navient serve about 15 million student loan borrowers nationwide who owe $ 648 billion, according to federal data. They operate administrative offices or call centers in Delaware, Pennsylvania, and Indiana.
“Several hundred employees work in the federal student loans department and we anticipate that these employees will move to Maximus,” a spokesperson for Navient said on Tuesday.
FedLoan said it was inevitable that there would be job cuts, but the Harrisburg agency also said it planned to cut staff through attrition. A spokesperson for FedLoan did not immediately respond to a question about the transition of the federal student loan agreement to a new organization.
“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. . âMaximus will be a great partner in ensuring borrowers and government are well served, and we look forward to receiving [Education Department] approval.”
Navient says the federal student loan service contract is a small part of his Wilmington corporate empire. The company reported $ 34 million in revenue for the federal student loan management contract through the Department of Education for the quarter ended June 30. Its other activities include loans to private colleges and contracts to help states process unemployment benefits, contact tracing, and vaccine administration services.
Teresa Weipert, Managing Director of Maximus’ Federal Services Company, said, âThis contract allows Maximus to apply our in-depth understanding of the needs of student borrowers and our industry-leading customer service to help [the Education Department] by successfully serving millions of student loan borrowers.
Seth Frotman, executive director of the nonprofit Student Borrower Protection Center and former student loan watchdog at the Consumer Financial Protection Bureau, said Navient should still be held accountable for past abuses.
Navient paid more than $ 4.4 billion to shareholders in the form of dividends and share buybacks, according to documents filed 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 the obstacles they have faced in repaying student loans managed by Navient.
(c) 2021 The Philadelphia Inquirer
Visit the Philadelphia Inquirer at www.inquirer.com
Distributed by Tribune Content Agency, LLC.
Copyright 2021 Tribune Content Agency.