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- Navient, which holds 5.6 million student-loan borrowers' accounts, is ending its services this year.
- Sen. Elizabeth Warren wants to ensure those borrowers aren't subject to abuse under the new company, Maximus.
- Warren requested information from Maximus on how it will ensure a seamless transition for borrowers.
There's a new student loan servicer in town, and Massachusetts Sen. Elizabeth Warren wants to keep them honest.
On Monday, Warren led four of her Democratic colleagues, including Ohio Sen. Sherrod Brown, in sending a letter to Maximus, the company that is taking over 5.6 million borrowers' accounts after Navient concludes its federal loan servicing contract in December. While Warren told Insider in September that the student-loan industry will be "far better off" without Navient, citing its decades of abusive practices, the progressive senator has concerns with how Maximus will handle millions of new borrowers.
"It is critically important that your company perform at a high bar and with increased transparency to provide the best possible service to borrowers and end a history of loan servicer abuses," the lawmakers wrote to Maximus' CEO Bruce Caswell.
Navient CEO Jack Remondi said in a statement in September that "Navient is pleased to work with the Department of Education and Maximus to provide a smooth transition to borrowers and Navient employees as we continue our focus on areas outside of government student loan servicing."
As the lawmakers noted in the letter, Maximus has handled the loans of over 1.7 million borrowers in default since 2019, and its record "raises concerns that borrowers may be subject to poor service and abusive practices." For example, a 2015 audit found Maximus had failed to address needed modifications to the defaulted loan servicing platform it manages, leading borrowers to have their wages garnished and tax credits seized.
The letter also cited Navient's "disturbing history of abuse and misbehavior towards borrowers" and asked Maximus to confirm, by December 8, its plans to ensure a seamless transition for the nearly six million borrowers while preventing the same errors Navient made over the past decade.
It's no surprise that Warren is cracking down on Maximus early — she has long held Navient in her sights, even before she was elected to the Senate. Insider reported in April on the comprehensive history Warren has with Navient, starting in 2006 when she was interviewed on "60 Minutes" and cited Sallie Mae, as Navient was formerly known, for its abuses of the student-loan system.
Since then, she has repeatedly called out the company for unlawful practices with borrowers, like in November 2018, when Warren released an audit providing evidence of Navient's record of causing students to go into deeper student debt by "steering student borrowers into forbearance when that was often the worst financial option for them."
And most notably, during an April hearing where she invited the CEOs of all the student-loan companies to testify, she told Navient's CEO, John Remondi, that he should be fired for the abuses that happened under his leadership.
The Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources announced in June they will be ending their servicing contracts this year, and although PHEAA recently reversed course and extended its contract one additional year to allow more time for the transition, by the end of 2022, 16 million student-loan borrowers will be at the hands of new companies.
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