6 million student loan borrowers “much better off” after another large company announces it will shut down, says Elizabeth Warren
- Navient, one of the largest student loan companies, has announced plans to end its federal loan services.
- Elizabeth Warren said her release would “much better” improve the federal student loan industry.
- She cited decades of abuse by the company, including pushing borrowers into more debt.
- See more stories on the Insider business page.
The student loan industry suffered another major upheaval on Tuesday when Navient became the third company to announce plans to end its federal student loan program as part of a regulatory crackdown in the past year.
Massachusetts Senator Elizabeth Warren had a message for the company: good riddance.
âNavient has spent decades deceiving, cheating and abusing student borrowers,â Warren told Insider in a statement. “The federal student loans program will be much better off without them.”
Navient, who collects federal student debt from six million borrowers, said in a press release that he was working with the Education Department to approve the transition of those borrowers to another student loan company, Maximus.
The announcement follows the announcement by the Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources in June of the end of their service contracts this year. With Navient following their lead, nearly 16 million borrowers will pay off their student debt to new businesses once the payment break is lifted in February.
Navient CEO Jack Remondi said in a statement that “Navient is delighted to work with the Department of Education and Maximus to ensure a smooth transition for Navient borrowers and employees as we continue to focus on areas other than the government student loan service “.
Warren, who has held both PHEAA and Navient in sight for decades, has made it clear that their plans to close are good for borrowers. She said in June that the 8.5 million borrowers served by PHEAA could “breathe a sigh of relief” since they would no longer have to deal with the company, and Warren told Insider in an interview. July that “the days are over” when students – loan companies could do “a terrible job”.
âThe world has changed for student loan administrators,â Warren said. “They can’t sign a contract, do a lousy job, cost borrowers tons of money and still get their contracts renewed.”
Warren has been fighting for Navient to be responsible since even before his election to the Senate. Insider reported Warren’s full story with Navient in April, from 2006 when she was interviewed on “60 Minutes” and cited Sallie Mae, as Navient was once known, for her abuse of the student loan system.
Since then, she has repeatedly called the company for illegal practices with borrowers, such as in November 2018, when Warren published an audit proving Navient had pushed students into more debt by “luring student borrowers out of debt. ‘abstention when it was often the worst financial option for them. ”
And most notably, during a hearing in April where she invited the CEOs of all student loan companies to testify, she told Navient CEO John Remondi that he should be fired for the abuses that took place. produced under his leadership.
Richard Cordray, head of the Federal Student Aid Office (FSA), said during an address at a conference earlier this month that student loan companies are choosing to shut down rather than face greater responsibility. Granted, he didn’t comment on specific companies, but noted that “not everyone is happy” with his plans to step up oversight of the industry.
Warren told Insider that even if all three companies end their student loan services, they “will continue to fight for greater accountability and better service for borrowers during and after the transitions to come.”
âAt the end of the day, the student loan system is broken,â Warren said. “The only way to ensure that borrowers do not face the same predatory behavior from Navient’s replacement is to write off student debt, so that no borrower is held hostage by companies profiting from their financial distress. . “