September 28, 2021 | WASHINGTON, D.C. — Today, embattled student loan giant Navient announced that it would no longer continue to serve as a top loan servicer for the U.S. Department of Education. In this capacity, Navient handles more than $237 billion in student loans owed by more than 6 million people, according to the most recent public data. Navient announced it has signed an agreement to transfer these U.S. Department of Education-owned student loan accounts to Maximus. As a federal loan servicer, Navient has been sued by state attorneys general, consumer advocates, and individuals across the country for deceiving and ripping off some of the nation’s most vulnerable student loan borrowers.
In response to this announcement, Student Borrower Protection Center Executive Director and former top student loan industry watchdog at the Consumer Financial Protection Bureau Seth Frotman released the following statement:
“Navient’s abuses have come to define the student debt crisis over the past decade. The company has cheated borrowers at every stage of repayment, including servicemembers, veterans with disabilities, low-income borrowers, and seniors. Soon, millions of Americans with student loans will no longer be forced to rely on a company that puts padding its own profits at the expense of its customers. But this work is far from done—this predatory company must be held accountable and the millions of borrowers who have been harmed deserve justice.”
For nearly a decade, Maximus has been the Education Department’s sole student loan servicer for federal student loan borrowers in default, during which time it has also been accused of a shocking range of abuses. For example, last year, Maximus’s mismanagement of the government’s student loan debt collection system famously led a federal judge to hold then-Education Secretary Betsy DeVos in contempt of court for seizing wages of former for-profit college students in violation of a court order.
Created in 2014 after being spun off from the student loan company Sallie Mae, Navient operates in various markets including student loan servicing, debt collection, and consumer lending. In addition to servicing more than $237 billion owed by more than 6 million federal student loan borrowers on behalf of the Department of Education, Navient also collects on more than $50 billion in government guaranteed loans originated under the older, bank-based federal student loan program and more than $19 billion in other private education loans.
Navient’s nearly decade-long experience as a servicer on behalf of the Department of Education has been marked by failure, scandal, and unparalleled borrower harm. Nevertheless, during this time Navient has made its owners and executives rich, paying more than $4.4 billion to shareholders through dividends and stock buybacks and lavishing more than $46 million on its CEO, Jack Remondi.
The company’s abuses are far-reaching and ongoing. Since 2011, tens of thousands of borrowers have filed complaints with Navient, the CFPB, and other government agencies about the obstacles they faced in repaying student loans that Navient services. Navient’s track record of harm includes the following:
- Navient illegally overcharged nearly 78,000 servicemembers. In 2014, Navient and its predecessor Sallie Mae paid almost $100 million in restitution and fines after the FDIC and DOJ found that the two companies ignored the 6 percent interest cap for servicemembers, unfairly conditioned receipt of SCRA benefits on made-up and difficult-to-attain qualifications, and deceptively allocated borrowers’ payments across loans in a way intended to maximize late fees. As law enforcement highlighted at the time, this happened even after Navient had “been put on notice of these borrowers’ active duty status.”
- Navient forced borrowers to pay more than they had to on their loans, adding up to $4 billion in avoidable interest charges. In 2017, the Consumer Financial Protection Bureau (CFPB) sued Navient for failing borrowers at every stage of repayment. The CFPB’s findings included that Navient had inappropriately and abusively placed struggling borrowers into high-cost repayment plans instead of more appropriate income-driven repayment plans that they are legally entitled to, costing borrowers as much as $4 billion in unnecessary interest charges and fees.
- Navient steered struggling borrowers to higher-cost repayment plans. In 2018, Senator Elizabeth Warren uncovered an audit of Navient conducted by the U.S. Department of Education, indicating that Navient boosted its profits by steering some borrowers into high-cost plans without discussing options that would have been less costly in the long run. In 2019, this finding was verified by the Education Department’s Inspector General, which reviewed documents prepared by Federal Student Aid showing that Navient representatives did not offer alternative or potentially beneficial options when attempting to assist borrowers with bringing their account current or managing repayment. Amid mounting litigation, three Congressional committees have launched inquiries into predatory loan servicing practices and efforts by Trump Administration officials to hide abuses by the student loan industry.
- Navient generated consumer protection lawsuits in courtrooms across the country. The attorneys general of Illinois, Washington, Pennsylvania, California, Mississippi, and New Jersey have all sued Navient for violating borrowers’ rights. State-level allegations against Navient include that it improperly reported permanently disabled borrowers as being in default on loans that should have been forgiven, and that it trapped thousands of older people in debts they were entitled to escape under the terms of their loan contract by deceiving borrowers about their rights.
- Navient evaded financial accountability. In February, Navient was ordered to pay the Department of Education back more than $22 million it had illegally taken from taxpayers by gaming an interest rate subsidy program.
The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.