BY Sydney LakeOctober 21, 2021, 3:20 PM
A student makes use of a laptop computer laptop on the campus of Dartmouth College, as seen in October 2021. (Photographer: Bing Guan—Bloomberg/Getty Images)
It’s official: Navient is out of the federal student loan servicing sport, efficient instantly. The U.S. Department of Education on Wednesday permitted the corporate’s proposal to switch loan servicing of 5.6 million Education Department–owned student loan accounts to Maximus, a federal contracting firm.
In late September, training loan administration firm Navient introduced its plans to cease servicing federal student loans held by the Education Department, passing off its enterprise to Maximus. Navient will maintain on to its non-public student loan servicing enterprise, nonetheless.
“We are confident this decision is in the best interest of the approximately 5.6 million federal student loan borrowers who will be serviced by Maximus and will provide the stability and high-quality service they deserve,” Richard Cordray, Federal Student Aid chief working officer, mentioned in a assertion on Wednesday.
Why does the Education Department have such religion in Maximus, an organization that’s seemingly an outsider to federal student loan servicing? Here’s what we all know.
Why Maximus is changing Navient
Maximus is a federal contractor primarily based exterior Washington, D.C. It’s higher identified for its large well being care, human service, and tech contracts with the federal authorities. The firm helps function the Centers for Medicare & Medicaid Services, and in May 2021 it landed a possible $951 million contract to help the Centers for Disease Control and Prevention’s COVID-19 nationwide surge help and vaccine help hotline.
While Maximus has been extra targeted on the well being care trade lately, the corporate already had shut ties to the Education Department earlier than the Navient transaction. Maximus has labored on contracts for the division’s debt administration and collections system and enterprise operations.
“This contract enables Maximus to apply our deep understanding of the needs of student borrowers and our industry-leading customer service to assist FSA in successfully serving millions of student loan borrowers,” Teresa Weipert, basic supervisor for the U.S. federal companies phase of Maximus, mentioned in a Sept. 28 assertion.
Plus, it seems as if the FSA trusts Maximus greater than the earlier student loan servicer; Navient had a questionable previous with federal student loan servicing. In December 2020, 9 debtors filed a class-action lawsuit alleging that Navient had fraudulently misallocated funds to increase the lifetime of probably hundreds of thousands of federal student loans. In June 2021, a federal decide in New Jersey mentioned the debtors may pursue the lawsuit.
FSA already seems to be much less involved now that Maximus is taking up Navient’s federal student loan account servicing.
“Our confidence in this [transaction] is bolstered by the fact that Maximus will be held to the stronger standards for performance, transparency, and accountability that FSA included in its recent servicer contract extensions,” Cordray mentioned in his assertion.
How the change will occur
The student loan servicers and FSA haven’t shared any further particulars on how debtors will probably be affected by the change and the way the switch will occur—apart from insisting there will probably be a “successful transition” of borrower accounts.
Navient did share that debtors will probably be transitioned to Maximus’s servicing division, Aidvantage, by the top of the 12 months after “a series of communications to borrowers.” Loans will keep on their present servicing platform owned by Fiserv, based on Navient.
“FSA, Navient, and Maximus will communicate directly with borrowers about how this change affects them,” Cordray mentioned in an announcement. “As evidence of our commitment to improving borrowers’ experience with federal student loans, we will make this transition as seamless as possible.”
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