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Warren and Pressley urge Navient to ‘attempt to defraud’ student loan borrowers

Two prominent Democrats pointed to student loan service Navient’s attempt to steer borrowers toward their private loan products, which would make them ineligible for up to $20,000 in debt relief announced by President Biden last month.

Senator Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) questioned Navient’s tactics in a letter to CEO John Remondi. The duo also sought advice from other major student loan servicers on how they plan to accurately notify borrowers of their eligibility for student loan forgiveness.

Servicers are a powerful pivotal point in the relative success or failure of the student debt relief order. Service agents have a notorious history of denying borrowers their best options for debt payment, steering them to more expensive products, misapplying payments, and failing to provide timely information, among many many other shortcomings.

As first reported by Business InternNavint has been send e-mails to its borrowers promoting a refinance offer in a private program called NaviRefi. As a private student loan, it would not be eligible for the debt relief announced by Biden, which totals $10,000 in forgiveness for all federal student loan borrowers, and $20,000 if the individual received a Pell grant. to attend university.

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Navient’s emails, which cite Biden’s recent announcement, detail the difference between federal student loans, which have fixed interest rates, and private loans, which have variable rates that can potentially be more favorable. depending on the borrower’s credit rating. “Why refinance with NaviRefi? We offer low interest rates, which can help you save money and pay off your loan faster,” the email reads.

In addition, the home page of NaviRefi website also uses federal loan forgiveness as a hook to try to get borrowers to “3-minute refinance.”

As a Navient representative told Business Insider, the fine print in the email and website mentions that refinancing could make borrowers ineligible for recently announced debt relief. But that’s not exactly important.

Warren and Pressley called the Navient email “attempting to scam borrowers for student debt relief” and “a particularly nefarious and harmful endgame tactic by Navient to take advantage of borrowers’ hardship.”

The two Democrats asked Navient to explain how many borrowers had received these email solicitations and how they would ensure that they were accurately informed of how to obtain relief.

Navient was once one of the largest student loan servicers, but in October 2021 the company withdrew from the federal service program, transfer credit management to a company called Maximus. Navient still handles some older loans made before 2010 under the federal Family Education Loan (FFEL) program, which private lenders own and the government guarantees.

The Biden administration has said borrowers with FFEL loans can consolidate them into direct loans to make them eligible for loan forgiveness. Who would be remove loans from Navient service. Navient simultaneously appears to be trying to attract FFEL borrowers to consolidate their loans into private NaviRefi loans. “If you have private student loans, the loan cancellation plan recently announced by the White House does not apply to you,” the NaviRefi site bed. But these borrowers have a process to get debt forgiveness on their loans by consolidating them into direct loans, which the homepage does not mention.

Servicers are a powerful pivotal point in the relative success or failure of the student debt relief order.

The Consumer Financial Protection Bureau continued Navient early 2017 for “borrowers defaulting at each stage of repayment”, one of the nearly a dozen examples fines, lawsuits and allegations against the company from senior federal and state law enforcement officials. A multi-state lawsuit filed by multiple attorneys general against Navient fixed this year for $1.8 billion, mostly in the form of debt cancellation.

In a second letter, Warren and Pressley contacted ten loan service companies for information about their plans to tell borrowers about the debt forgiveness program. Companies like Nelnet have asked borrowers to stop calling them with questions about the program, due to “high phone volume”.

Warren and Pressley requested records of staffing levels for customer service lines and current call wait times, as well as copies of call scripts and email communications to borrowers, in addition plans for how companies will notify borrowers that FFEL loans can be consolidated into Direct Loans to receive forgiveness. He also asked the other managers if they had sent information that could be perceived as directing borrowers to private loans.

There are no remaining applications that borrowers will need to complete to claim eligibility for debt relief (eligible individuals must have earned less than $125,000 per year for individuals and $250,000 per year for households). The app is expected to go live by mid-October, and borrowers can sign up for to receive an alert when it is ready.

The services, which have not had to collect payments from borrowers on federal student loans since March 2020, will resume collecting payments in January, according to the current schedule. They must inform borrowers about this and about the possibility of debt relief. They should also reduce account loan balances when debt relief is executed and implement new income-contingent repayment (IDR) rules when finalized.

That’s a lot to do for a group of entrepreneurs who haven’t exactly executed flawlessly throughout their history. Indeed, two repairers, Maxim and Nelnet, recently wrongly told borrowers that payments would be due in September, despite the Department of Education specifically telling officers not to. Meanwhile, this complex set of steps will need to be put in place during the holiday season, when most repairers are at a low staffing level.

As Mike Pierce, executive director of the Student Borrower Protection Center, told the Perspective In a recent podcast, while debt relief appears to be as simple as changing a number on a ledger, none of the service systems are set up exactly the same. “It’s actually a bunch of different ledgers, sometimes the number is different depending on the person, and we trust companies we shouldn’t trust to be able to connect the dots,” Pierce said.