The biggest name in student loans is exiting the business. Navient, which currently manages — or, in the parlance of the industry, services — student loans for 5.6 million US customers, has asked the US Department of Education to let it transfer its caseload to Maximus, a global administrator of government programs. Though Navient itself is not a lender, it manages the repayment process for student loans on behalf of the government — or, it did, until former President Donald Trump enacted a moratorium on student debt payments in March 2020 in response to COVID-19. Since then, that measure has been extended by President Biden, and student debt obligations remain on hold until January 2022.
Navient’s expected departure follows the exit of two other federal loan servicers earlier this year. “Between FedLoan, Granite State and now Navient, the impact and timing of these large-scale servicer transitions amidst the scheduled return to repayment will bring unprecedented change for nearly 16 million borrowers in total,” says Lindsay Clark, Director of External Affairs at Savi, a social impact technology company that helps borrowers navigate federal loans.
Between the repayment moratorium and talk of canceling qualifying student loan debt altogether, there’s a lot to keep track of in this formerly sleepy backwater of the financial services industry. If you’re one of the millions of borrowers with a Navient-serviced loan, everything you need to know is below.
Why is Navient withdrawing from the student loan business?
Navient is leaving the business while under fire from the Consumer Financial Protection Bureau, which sued it in 2017, claiming that the company had made it difficult for borrowers to repay their loans. That lawsuit is still in process, and Lux says that the “increase in federal regulation and government scrutiny over federal loan servicing is almost certainly to blame for Navient’s departure.”
But Navient was already set to end its federal loan services at the end of the year. In 2020, the US Department of Education announced changes to loan servicing in an effort to modernize the federal student loan system. As part of the Next Gen Initiative, the Department of Education extended its partnership with five of the 10 current loan servicers, which would continue servicing federal student loans — but under stricter government regulations. Navient, along with FedLoan and Granite State opted to end their participation in federal student loan servicing at the end of 2021.
What does Navient’s departure mean for borrowers?
If your loans are currently serviced by Navient, here’s what you need to know:
1. Navient will stop servicing your student loans
Whether or not the FSA agrees to transition the loans to Maximus, your student loan will no longer be serviced by Navient. While the current transition was set to happen at the end of the year, if the FSA lets Navient agree to withdraw early, this means the transition could happen sooner.
2. Maximus could become your new loan servicer
If Navient’s agreement with Maximus is accepted by the FSA, Maximus could become your new loan servicer. That means you would pay your student loans to Maximus instead of Navient. The FSA could also opt to switch your loan to one of the other four Next Gen-approved servicers.
3. You’ll be notified about next steps
Regardless of how that shakes out, you’ll receive notification from the Department of Education, Navient and your new servicer about next steps. If you’re a current customer of Navient, we recommend logging into your account and making sure your mailing address and other contact information is up-to-date. You can also pull records of your payment history, current loan balances and yearly statements now, so you have them for your records.
4. You shouldn’t notice any major changes
While the transition may happen sooner than planned, ultimately, you should not notice any major changes with your student loans. Any plans or special payment methods you’re enrolled into should transfer over automatically. That noted, you’ll want to be on the lookout for key dates, such as when you can begin logging into your new loan servicing system, to doublecheck that everything transferred correctly.
5. Consider reviewing repayment plans now
If you’ve been taking advantage of the federal student loan repayment moratorium — which was recently extended until January 31, 2022– now is a great time to review your repayment plan. If your financial situation has changed, you may be eligible for an income-driven repayment plan or another repayment option. And you don’t need to wait to enroll; all you’ll need to do is log in and confirm that your personal information is correct.
6. You may experience delays during the transition
The transition may slow things down. Customer support response times may be delayed as account information is transferred — particularly if your account is in forbearance. “It will be interesting to see how the new servicers will handle the transition and training of new borrower support calls,” said Fred Amrein, CEO and Founder of PayForEDAmrein says. “Borrowers should anticipate a longer response time.” For now, the best way to ensure a seamless transition is to make sure your repayment information is up to date.
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Source by www.cnet.com