Navient seeks exit from fed student loans
WILMINGTON – Navient, the major student loan servicing firm, is seeking to transfer its federal student loans to another firm as the industry prepares to begin processing most payments again starting early next year.
The Riverfront-headquartered firm that spun out of Sallie Mae in 2014 announced plans Tuesday night to transfer the accounts of roughly 6 million borrowers to Virginia-based federal loan servicer Maximus. The deal, affecting U.S. Department of Education-owned student loan accounts, is subject to the department’s approval, but the firms anticipate it closing before the end of the year.
The transfer agreement would impact an unspecified number of Navient employees who currently work on those loans, as they will transfer to Maximus as well. A Navient spokesman told Delaware Business Times that none of those employees are in Delaware, but at offices in Pennsylvania and Indiana.
“Navient is pleased to work with the Department of Education and Maximus to provide a smooth transition for borrowers and Navient employees as we continue our focus on areas outside of government student loan servicing,” said Jack Remondi, Navient president and CEO, in a statement announcing the deal.
Most student borrowers have deferred payments on their loans as the federal government waived interest and penalties for non-payment through the pandemic. That moratorium is set to expire on Jan. 31, 2022 though, as the Biden administration looks to restart collections.
Federal Student Aid Chief Operating Officer Rich Cordray, whose office is reviewing the Navient-Maximus plan, said it looked to ensure it satisfies “all legal requirements and properly protects borrowers and taxpayers.”
“We remain committed to making sure that our federal student loan servicing agreements provide more accountability, meaningful performance measures, and better service for borrowers. FSA looks forward to working with servicers committed to fulfilling these requirements as they do the important work to service more than 40 million federal student loans,” he said in a statement.
Navient would become the second federal loan servicer to drop out of the industry as FedLoan announced that it was dropping out of about 9 million accounts earlier this summer.
The transfer won’t end Navient’s years-long legal battle with the federal Consumer Financial Protection Bureau though. The company is still defending itself from accusations that it hindered borrowers who were trying to make payments on their loans.
“That case just continues to grind its way through the slow — very, very slow — court process,” Remondi told analysts on the company’s second quarter earnings call in July. “We’re eager to have our day in court.”