Sen. Elizabeth Warren is calling out this student loan servicer for abusive practices amid looming student loan default.
Here’s what you need to know.
In a scathing letter to student loan servicer Maximus, Warren (D-MA) wants assurances that Maximus will protect student loan borrowers when Maximus assumes Navient’s portfolio of 5.6 million student loans when Navient is expected to stop servicing federal student loans by year end. Here’s what inside the letter:
Student loan relief is ending soon
Warren is deeply concerned that the Biden administration will not extend student loan relief from the Covid-19 pandemic beyond January 31, 2022. That means student loan borrowers will restart federal student loan repayment beginning February 1, 2022. Student loan payments and student loan interest rates will return to normal following 22 months of temporary student loan forbearance. (Here are 3 ways to get a lower student loan payment). Warren has expressed concern that millions of student loan borrowers will default on their student loans if President Joe Biden doesn’t extend student loan relief until later next year. Despite her efforts to extend student loan forbearance, the U.S. Department of Education has said there will be no extension of this student loan relief. At the same time, Warren has been the leading advocate calling for wide-scale student loan forgiveness for borrowers, including up to $50,000 of student loan cancellation. (Here’s how to apply for limited student loan forgiveness).
Student loans: “end a history of student loan servicer abuses”
While this student loan relief is ending, Warren wants to “end a history of student loan servicer abuses.” Warren specifically called out Maximus, including:
- Over the past 8 years, Maximus has received more than $800 million from the U.S. Department of Education for managing student loans in default; (How to apply for student loan forgiveness during the Biden administration)
- Warren says Maximus’ track record may raise concerns that student loan borrowers may get “poor service” and “abusive practices”;
- Warren alleges that Maximus mismanaged student loan defaults, which resulted in thousands of student loan borrowers who were eligible for borrower defense to repayment improperly “having their loan entered into default, and their tax refunds inappropriately seized or their wages garnished”;
- Maximus has never managed pre-default student loans, and Warren is concerned about Maximus’ ability to “meet a higher bar of accountability”; and
- Maximus has a potential conflict of interest as a servicer for all student loans currently in default, and its new role as a servicer for 5.6 million borrowers currently in student loan repayment.
Navient will no longer service your federal student loans
Navient, which services $300 billion of student loans for 12 million student loan borrowers, announced last month that Navient will exit federal student loan servicing with the U.S. Department of Education. (Here’s what this means for your student loans). Navient announced the surprise move within days of Congress avoiding a major government shutdown and signed a definitive agreement to transfer its federal student loan servicing for U.S. Department of Education-owned student loan accounts to Maximus. (Here’s why Navient quit your student loans). Navient was likely to face increased regulatory oversight from the U.S. Department of Education, Congress, state attorneys general and the Consumer Financial Protection Bureau (CFPB). Warren wants to ensure that Maximus — which Warren says has a “checkered history” of servicing student loans — will now service $449 billion of student loans for 13 million student loan borrowers. Given this increased responsibility, Warren wants to ensure that Maximus is transparent, responsive to borrower complaints, and provides accurate and timely information to student loan borrowers. (If you want student loan forgiveness, do these 5 steps).
What this means for your student loans
The U.S. Department of Education has announced several major changes to student loans and student loan forgiveness in recent weeks. For example, the Education Department will cancel $2 billion of student loans within weeks. If Navient is your current student loan servicer for federal student loans, Maximus will likely become your new federal student loan servicer. The U.S. Department of Education will contact you in writing regarding this transition. You don’t have to take any action. Your student loan terms, including your interest rate, student loan repayment plan and student loan terms will stay the same. However, you will want to update your autopay information once the transition is complete because you will make student loan payments to Maximus if Maximus becomes your new student loan servicer. That said, you should continue to make student loan payments to Navient until the Education Department notifies you otherwise. Importantly, this is only for federal student loans, and private loans won’t be impacted.
The end of temporary student loan forbearance means that you must have a game plan for student loan repayment. Make sure you understand all your options now. Here are some popular ways to pay off student loans: