The Department of Education on Wednesday introduced it has permitted a proposal by Navient
Last month, Navient introduced that it intends to withdraw from the U.S. Department of Education’s federal student loan servicing system. Navient’s transfer got here on the heels of the introduced exit of different main federal student loan servicers from the Department’s system, together with FedLoan Servicing and Granite State Management & Resources.
Navient had proposed transferring its Department of Education federal student portfolio to a different firm referred to as Maximus. Maximus is an current contractor for the Department, primarily dealing with its defaulted federal student loan accounts. Navient’s proposal was topic to Department approval.
On Wednesday, the Department introduced that it has permitted Navient’s request. “Federal Student Aid (FSA) approved the request for Maximus to assume the Navient loan servicing contract,” mentioned FSA Chief Operating Officer Rich Cordray in a press release. “We are confident this decision is in the best interest of the approximately 5.5 million federal student loan borrowers” who will probably be impacted by the switch. Cordray indicated that Maximus will probably be held to “stronger standards for performance, transparency, and accountability.”
The Department of Education has not supplied a particular timeline as to when the servicing transfers will happen. The Biden administration not too long ago prolonged Navient’s contract by an extra two years, suggesting that the transition will not be quick. However, Navient mentioned in a press release that the corporate is working with Maximus “on continuing to provide high-quality service to borrowers as they transition to Maximus’s servicing division, Aidvantage, by year end, after a series of communications to borrowers.”
Importantly, the Navient servicing transfers will solely affect government-held federal student loans. Private student loans and commercially-held FFEL-program loans which can be serviced by Navient shouldn’t be impacted by the settlement with the Department and with Maximus.
Student loan servicing transfers have traditionally been disruptive for some debtors. In a report issued in 2015 following the Department’s final main servicing overhaul, the Consumer Financial Protection Bureau concluded that “servicing transfers can create confusion when companies have different policies and procedures related to payment posting, allocation, and processing… When servicers change, borrowers may need to navigate a range of new policies and procedures. In addition, when errors occur during servicing transfers… this can affect every aspect of the student loan repayment process, leading to problems.”
Cordray sought to guarantee debtors that this transition will go extra easily than earlier federal student loan servicer adjustments. “FSA, Navient, and Maximus will communicate directly with borrowers about how this change affects them,” mentioned Cordray, and they’re going to endeavor to “make this transition as seamless as possible.” FSA will put up “specific information” for debtors on the Department of Education’s web site. Cordray made assurances that “borrowers will not lose access to their payment histories or account data, and they will not need to change their current log-in information, automatic payment arrangements, or other borrower-specific details.”
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