US Student Loan Service Provider Withdraws

A second company servicing student debt has asked the United States federal government to be released from its contract.

Navient, based in Wilmington, Delaware, last month announced it had signed an agreement to transfer student debt services to the company Maximus. The deal must be approved by the US Department of Education’s Federal Student Aid office.

“Navient and Maximus are committed to working together and believe this plan provides the government with a reliable approach to supporting borrower success and advancing its vision for next-generation services,” Navient said in a press release. The company said it expects the deal to be finalized in the new fiscal year.

Signage is seen at Navient's offices in Wilmington, Delaware, USA, June 9, 2021. (Photo: REUTERS/Andrew Kelly)

Signage is seen at Navient’s offices in Wilmington, Delaware, USA, June 9, 2021. (Photo: REUTERS/Andrew Kelly)

The deal was made just before student debt payments resumed in January 2022. The federal government suspended US student debt payments last year amid the COVID-19 pandemic. The Navient company serves 6 million borrowers.

In July, the Pennsylvania Higher Education Assistance Agency, known as FedLoan with its 8.5 million borrowers, notified the Federal Student Aid office that it would not accept extensions of its 12-year federal student debt service contract “beyond what is necessary to ensure a smooth transition for borrowers,” he said in a press release.

US Senator Elizabeth Warren, a Democrat from Massachusetts, has branded Navient’s student debt management as corrupt and predatory.

In April, at Warren’s first trial as chairman of the Banking, Housing and Urban Economic Policy Subcommittee, Navient CEO Jack Remondi denied his company was guilty of the practice.

Student loans have become a hot political issue among lawmakers and politicians as progressives such as Warren and Vermont Senator Bernie Sanders – both presidential candidates in the 2020 presidential race – have recommended student debt forgiveness. The student debt forgiveness advocate said it would free up student debt to spend the money on other items, such as housing, that would contribute to the economy and improve their quality of life.

Warren introduced the resolution in February that would have granted $50,000 debt forgiveness to individual borrowers and asked President Joe Biden to use executive action to implement it. So far, President Biden has not done so.

Critics of debt forgiveness, such as borrowers who have already paid their debts, argue that student debtors must pay off and meet their financial obligations.

The median student debt at graduation for the class of 2021 is estimated at $36,140 and carries an average interest rate of 2.75%, according to EducationData.org. In comparison, the class of 2010 graduated with an average debt of $29,880 at a 6% interest rate. Collectively and nationally, US student debt has reached nearly $1.7 trillion.

For further comparison, the average auto loan debt for a new vehicle is $34,635, according to Lending Tree, with an interest rate of 9.46%.

Collectively, auto loan debt has reached nearly $1.4 trillion nationally. [my/jm]

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