Warren Questions New Student Loan Servicer’s ‘Checkered’ Past

A group of Democratic U.S. senators led by Sen. Elizabeth Warren of Massachusetts is demanding answers from Maximus, the company slated to take on a portfolio of 5.6 million student loans.

In a letter sent this week to Maximus president and CEO Bruce Caswell, five senators questioned the company’s history and demanded to know how it intends to service what would be a massive portfolio of student loans.

The Virginia-based government services company already handles student loans from over 1.7 million borrowers currently in default. Once Maximus assumes its new loan portfolio, previously serviced by Navient, Maximus will be managing $449 billion of debt.

The U.S. Department of Education (ED) announced last month that Navient will no longer service student loans on ED’s behalf.

In their letter, the senators said Maximus has a “checkered history” as ED’s contractor handling loans since 2019. The letter asked how the company will dually manage current and future loans, including staffing plans and hiring timeframes, new employee training, the transfer of loan records from Navient, and new customer communication.

“Your track record as a contractor raises concerns that borrowers may be subject to poor service and abusive practices,” the letter stated.

In the letter, the senators blame Maximus for ED having to pay a $100,000 fine in 2019 after violating an order to stop collection loans owed by students who had been defrauded by the for-profit Corinthian Colleges. Maximus managed the account for defaulted loans at the time of this occurrence and, according to the letter, “its mismanagement of the government’s student loan debt collection system led to the judge’s action.”

In an October 2019 video statement, Mark Brown, then the chief operating officer for Federal Student Aid, said ED “mistakenly” billed 16,000 students and parents due to loan servicers’ mistakes.

In their letter, Warren and the Democratic senators also raised concerns over potential conflicts of interest. The letter stated that there may be incentive to allow borrowers to slip into default if Maximus also services the defaulted loans.

“Though the compensation schedule for loan servicers pays a higher rate for loans that are maintained in active repayment, Maximus also has an opportunity to profit on loans in default through its existing contract to manage defaulted loans,” the letter said. “It is therefore essential that Maximus create a clear separation between these two operations.”

According to its most recent annual report, Maximus generated $4.25 billion in revenue and $291 million in net income in its most recent fiscal year.

The letter’s signatories listed seven questions and concerns for Maximus, demanding a response by Dec. 8.

Maximus will take control of Navient’s servicing contract in January, after which it will manage debt held by nearly 13 million borrowers.

The letter requests Maximus to address:

Eileen Rivera, vice president of communications at Maximus, said in an email to BestColleges that Maximus has pledged to respond to the senators’ letter. Rivera did not specify whether the company would do so by the Dec. 8 deadline put forth by the senators.

Rivera’s email also said Maximus would ensure the transition from Navient is “as seamless as possible,” so as not to trouble borrowers still repaying their loans.

“This is a defining moment for student borrowers, and we couldn’t agree more with Senator Warren — it is imperative we get it right,” Rivera’s email said. “We will respond to her great questions and ensure that she and her staff share the Department of Education’s confidence in us as the servicing of these student loans transitions from Navient to Maximus.”