Warren Warns of ‘Predatory’ Student Loan Servicers
Credit: Tom Williams / Contributor / CQ-Roll Call, Inc. / Getty Images- Student loan servicer Navient reportedly encouraged borrowers to consolidate their loans into a private program.
- Such consolidation would make them ineligible for President Biden’s student loan forgiveness program.
- Sen. Warren has requested all loan servicers detail their correspondence with borrowers since the Aug. 24 announcement.
U.S. Sen. Elizabeth Warren didn’t mince words in a letter to a federal student loan servicer that she says engaged in predatory behavior toward borrowers.
The Democratic senator from Massachusetts on Monday sent the missive to Navient following reports that the company sent emails to some borrowers encouraging them to consolidate their loans into its private NaviRefi program. Navient currently manages approximately 4.3 million Federal Family Education Loans (FFEL).
Such consolidation would provide borrowers with a lower interest rate, but it would make these borrowers ineligible for President Joe Biden’s student loan forgiveness plan that promises up to $20,000 in debt cancellation for those making less than $125,000 per year.
“If these reports are accurate, they reveal a particularly nefarious and harmful last-ditch tactic by Navient to profiteer off of the hardship of borrowers that finally are within grasping distance of obtaining relief from their abusive student loans,” Warren wrote in her letter.
According to an analysis from investment bank Credit Suisse, Biden’s debt cancellation plan could impact Navient considerably. Interest from FFEL program loans accounted for 37% of the company’s second-quarter revenue.
Additionally, many experts have advised borrowers with commercially held FFEL loans to consolidate those loans into the Direct Loan program to be eligible for forgiveness. Doing so would mean that Navient would lose servicing of these loans completely, rather than just losing out on revenue from whatever is forgiven.
“In this context, the marketing emails encouraging your borrowers to refinance their loans with NaviRefi, thus making them ineligible for loan forgiveness, look like another predatory attempt by Navient to boost its profits by unfairly steering borrowers toward options that leave them financially worse off,” Warren said in her letter.
In an email to BestColleges, a spokesperson for Navient highlighted the company’s efforts for transparency.
“NaviRefi’s promotional emails, website … and application and approval processes include clear, comprehensive and numerous statements designed to help borrowers understand the terms of private loans,” the spokesperson said.
The statement added that Navient included an additional disclaimer in the wake of Biden’s Aug. 24 announcement of widespread student debt relief.
“Please carefully review your current and potential benefits with your federal loan servicer, including loan forgiveness options such as Public Service Loan Forgiveness and Income-Driven Repayment, before refinancing,” read part of the disclaimer.
Questions for Navient and Others
Warren asked in her letter that Navient CEO John Remondi respond to questions she has regarding the company’s email to borrowers, as well as its more general plans to help facilitate debt forgiveness.
The senator asked that Navient respond by Sept. 26.
The questions included:
- How many people did Navient send emails to regarding refinancing following Biden’s Aug. 24 debt cancellation announcement?
- How many people have refinanced — or started the process to refinance — their loans through the NaviRefi program since Aug. 24?
- How will Navient notify and advise borrowers regarding the president’s loan forgiveness plan?
- What outreach is the company doing to alert FFEL borrowers about the plan?
- How will Navient communicate with FFEL borrowers regarding their ability to consolidate their loans into the Direct Loan program to qualify for debt cancellation?
The Navient spokesperson did not say whether the company plans to respond to the senator’s letter by the Sept. 26 deadline.
Warren didn’t stop at just Navient. The senator also addressed a letter to executives at other private loan servicing companies that hold federal student debt.
In that letter, she asked these companies:
- How are they advising borrowers who call asking for more information about debt cancellation?
- How are they advising borrowers with FFEL program loans?
- Describe outreach efforts regarding debt cancellation and the new income-driven repayment (IDR) program reform, including those with FFEL loans.
- Have these companies sent borrowers information offering them a refinancing option into a private plan?
Warren also asked several questions regarding these servicers’ ability to provide adequate customer service for those asking about debt cancellation.