Major Student-Loan Company to Stop Servicing Federal Student Loans

One of the largest student loan companies in the United States, Navient, has announced that it is planning to end its federal student loan service, becoming the third company to take such a decision.

The company has requested the government’s approval to end its servicing contract, Erudera.com reports.

According to a media release by Navient, the company will transfer the federal student loan accounts of the six million borrowers to Maximus, which is another contractor of the Department of Education.

“Navient and Maximus have submitted a preliminary request for review. The contract novation will be subject to the consent of FSA. Following receipt of all necessary approvals including FSA approval and other customary closing conditions, Navient would exit the Department of Education student loan servicing program as planned,” the release added.

Senator Elizabeth Warren, Democrat of Massachusetts, welcomed the news saying that Navient has spent years misleading, cheating, and abusing student borrowers.

“The Federal student loan program will be far better off without them,” she wrote on Twitter.

Meanwhile, Navient President and CEO Jack Remondi expressed delight that his company will work with the Department of Education and Maximus to provide a smooth transition to borrowers and Navient employees as the company shifts focus on areas outside of government student loan servicing.

“Maximus will be a terrific partner to ensure that borrowers and the government are well served, and we look forward to receiving FSA approval,” Remondi said.

He added that Navient and Maximus have been working with the Department of Education earlier to facilitate the transition for the borrowers.

According to Navient’s press release, both companies are committed to working together in this regard, optimistic that the government will find the plan constructive for a reliable approach to support borrowers and advance its vision for next-generation servicing.

In a statement, the director of the Federal Student Aid (FSA) office, Richard Cordray, said that FSA is reviewing the documents submitted by both companies in order to make sure that the plan fulfills legal requirements and will not affect borrowers negatively.

Navient manages nearly $300 billion of private and federal student loans for a total of 12 million student loan borrowers, and it isn’t the only company to announce plans to end loan servicing this year. The Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources, servicing around 10 million borrowers, have also decided to end their contracts.