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Navient was once one of the largest student loan servicers, but in October 2021, the company pulled out of the federal servicing program.
Two prominent Democrats have highlighted student loan servicer Navient’s attempt to steer borrowers to their private loan products, which would make them ineligible for up to $20,000 in debt relief that President Biden announced last month.
Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) questioned Navient’s tactics in a letter to CEO John Remondi. The duo also sought guidance from the other leading student loan servicers about how they plan to notify borrowers accurately about their opportunity to receive student debt forgiveness.
The servicers are a powerful hinge point in the relative success or failure of the student debt relief order. Servicers have a notorious history of denying borrowers their best options for debt payments, steering them toward higher-cost products, misapplying payments, and not delivering timely information, among many other deficiencies.
As first reported by Business Insider, Navient has been sending emails to its borrowers promoting an offer to refinance into a private program called NaviRefi. As a private student loan, it would not be eligible for the debt relief Biden announced, which totals $10,000 in forgiveness for all federal student loan borrowers, and $20,000 if the individual received a Pell grant to attend college.
The Navient emails, which cite the recent Biden announcement, detail the difference between federal student loans, which have fixed interest rates, and private loans, which have variable rates that can potentially be more favorable, depending on a borrower’s credit score. “Why refinance with NaviRefi? We offer low interest rates, which can help you save money and pay off your loan faster,” the email states.
In addition, the homepage of the NaviRefi website also uses the federal loan forgiveness as a hook to try to push borrowers to “refinance in 3 minutes.”
As a Navient representative told Business Insider, the fine print of the email and the website does mention that refinancing could make borrowers ineligible for the recently announced debt relief. But that’s not exactly prominent.
Warren and Pressley referred to the email as Navient “attempting to scam borrowers out of student debt relief,” and “a particularly nefarious and harmful last-ditch tactic by Navient to profiteer off the hardship of borrowers.”
The two Democrats asked Navient to explain to them how many borrowers received these email solicitations, and how they would make sure to notify them accurately about how to obtain relief.
Navient was once one of the largest student loan servicers, but in October 2021, the company pulled out of the federal servicing program, transferring its loan management to a company called Maximus. Navient still services some older loans made before 2010 under the Federal Family Education Loan (FFEL) program, which private lenders own and the government guarantees.
The Biden administration has said borrowers with FFEL loans can consolidate them into Direct Loans to make them eligible for loan forgiveness. That would remove loans from Navient’s servicing. Navient appears to be simultaneously trying to attract FFEL borrowers to consolidate their loans into private NaviRefi loans. “If you have private student loans, the loan forgiveness plan recently announced by the White House does not apply to you,” the NaviRefi website reads. But those borrowers do have a process to get debt forgiveness on their loans by consolidating them into Direct Loans, something the homepage does not mention.
The servicers are a powerful hinge point in the relative success or failure of the student debt relief order.
The Consumer Financial Protection Bureau sued Navient in early 2017 for “failing borrowers at every stage of repayment,” one of nearly a dozen examples of fines, lawsuits, and allegations against the company from top federal and state law enforcement officials. A multistate lawsuit filed by numerous attorneys general against Navient settled this year for $1.8 billion, mostly in the form of debt forgiveness.
In a second letter, Warren and Pressley contacted ten loan servicing companies seeking information on their plans to inform borrowers about the debt forgiveness program. Companies like Nelnet have asked borrowers to stop calling them with questions about the program, due to “heavy phone volume.”
Warren and Pressley asked for records of staffing levels for customer service lines and current call wait times, as well as copies of call scripts, and email communications to borrowers, in addition to plans for how companies will inform borrowers that FFEL loans can be consolidated into Direct Loans to receive forgiveness. It also asked the other servicers if they have sent information that could be perceived as steering borrowers into private loans.
There remains no application that borrowers will have to fill out to assert eligibility for debt relief (those eligible must have made less than $125,000 a year for individuals, and $250,000 a year for households). The application is expected to go online by mid-October, and borrowers can sign up to StudentAid.gov to get an alert when it is ready.
Servicers, which have not had to collect payments from borrowers on federal student loans since March 2020, will resume collecting payments in January, under the current schedule. They must inform borrowers about this and the opportunity for debt relief. They also must reduce loan balances from accounts when debt relief is executed, and apply new income-driven repayment (IDR) rules when those are finalized.
It’s a lot to do for a group of contractors that have not exactly executed flawlessly throughout their history. Indeed, two servicers, Maximus and Nelnet, just recently told borrowers mistakenly that payments would be due in September, despite the Education Department specifically telling servicers not to do so. Meanwhile, this complex set of steps will have to be stood up during the holiday season, when most servicers are at a low point on staffing.
As Mike Pierce, executive director of the Student Borrower Protection Center, told the Prospect in a recent podcast, while debt relief would seem to be as simple as changing a number on a ledger, none of the servicer systems are set up in precisely the same way. “It’s actually a bunch of different ledgers, the number is sometimes different depending on the person, and we’re trusting companies that we shouldn’t trust to be able to connect the dots,” Pierce said.
