It’s official: Navient is out of the federal student loan servicing game, effective immediately. The U.S. Department of Education on Wednesday approved the company’s proposal to transfer loan servicing of 5.6 million Education Department–owned student loan accounts to Maximus, a federal contracting company.
Navient borrowers: Meet your new student loan servicerBY Sydney LakeOctober 21, 2021, 3:20 PM
In late September, education loan management company Navient announced its plans to stop servicing federal student loans held by the Education Department, passing off its business to Maximus. Navient will hold on to its private student loan servicing business, however.
“We are confident this decision is in the best interest of the approximately 5.6 million federal student loan borrowers who will be serviced by Maximus and will provide the stability and high-quality service they deserve,” Richard Cordray, Federal Student Aid chief operating officer, said in a statement on Wednesday.
Why does the Education Department have such faith in Maximus, a company that’s seemingly an outsider to federal student loan servicing? Here’s what we know.
Why Maximus is replacing Navient
Maximus is a federal contractor based outside Washington, D.C. It’s better known for its massive health care, human service, and tech contracts with the federal government. The company helps operate the Centers for Medicare & Medicaid Services, and in May 2021 it landed a potential $951 million contract to support the Centers for Disease Control and Prevention’s COVID-19 national surge support and vaccine assistance hotline.
While Maximus has been more focused on the health care industry recently, the company already had close ties to the Education Department before the Navient transaction. Maximus has worked on contracts for the department’s debt management and collections system and business operations.
“This contract enables Maximus to apply our deep understanding of the needs of student borrowers and our industry-leading customer service to assist FSA in successfully serving millions of student loan borrowers,” Teresa Weipert, general manager for the U.S. federal services segment of Maximus, said in a Sept. 28 statement.
Plus, it appears as if the FSA trusts Maximus more than the previous student loan servicer; Navient had a questionable past with federal student loan servicing. In December 2020, nine borrowers filed a class-action lawsuit alleging that Navient had fraudulently misallocated payments to extend the life of possibly millions of federal student loans. In June 2021, a federal judge in New Jersey said the borrowers could pursue the lawsuit.
FSA already appears to be less concerned now that Maximus is taking over Navient’s federal student loan account servicing.
“Our confidence in this [transaction] is bolstered by the fact that Maximus will be held to the stronger standards for performance, transparency, and accountability that FSA included in its recent servicer contract extensions,” Cordray said in his statement.
How the switch will happen
The student loan servicers and FSA haven’t shared any additional details on how borrowers will be affected by the change and how the transfer will happen—other than insisting there will be a “successful transition” of borrower accounts.
Navient did share that borrowers will be transitioned to Maximus’s servicing division, Aidvantage, by the end of the year after “a series of communications to borrowers.” Loans will stay on their current servicing platform owned by Fiserv, according to Navient.
“FSA, Navient, and Maximus will communicate directly with borrowers about how this change affects them,” Cordray said in a statement. “As evidence of our commitment to improving borrowers’ experience with federal student loans, we will make this transition as seamless as possible.”