It comes as the Biden administration prepares to resume collecting federal student loan payments that have been frozen since the start of the pandemic while also figuring out how to respond to pressure from progressives to cancel large swathes of the 1.6. trillion dollars in outstanding federal student debt.
Richard Cordray, the head of Federal Student Aid, said in a statement to POLITICO that his office has been monitoring negotiations between the two companies and is now reviewing the deal.
Federal student aid officials “are reviewing documents and other information from Navient and Maximus to ensure the proposal meets all legal requirements and properly protects borrowers and taxpayers,” Cordray said.
“Navient is pleased to work with the Department of Education and Maximus to ensure a smooth transition for borrowers and Navient employees as we continue to focus on areas other than government student loan servicing,” said Jack Remondi, President and CEO of Navient, said in a press release.
Financial terms of the agreement between Navient and Maximus were not disclosed. Both companies said they plan to complete the transaction in the fourth quarter of this year.
Navient, which broke away from Sallie Mae in 2014, has long been the most controversial of the companies hired by the Education Department. He has been repeatedly targeted by progressives for allegations that he mistreated student loan borrowers.
In 2017, the Consumer Financial Protection Bureau, then run by Cordray, sued the company, accusing it of deceiving and deceiving borrowers. Navient sought to settle the CFPB lawsuit during the Trump administration, but a deal was never reached and the company is still pursuing the case in court.
Six other Democratic state attorneys general have since pursued their own lawsuits that make similar allegations that the company misled or mistreated student loan borrowers. Federal judges in each of the cases have ruled that the lawsuits can continue, although the company has denied the allegations and continues to defend itself.
Senator Elizabeth Warren (D-Mass.) Was the chief Capitol Hill critic for the Department of Education’s relations with Navient, including when the Obama administration extended Navient’s contract in 2014. Earlier this year, she called on the Biden administration to fire the company. .
Navient manages the federal student loan accounts of 5.6 million borrowers who collectively owe about $ 283 billion, according to the company’s latest financial statement.
But Navient’s work for the education ministry represents a relatively small part of his business, around 6% of his income, according to the company. Navient also has a private student loan company and a portfolio of older federally guaranteed student loans.
Monthly payments and interest on most federal student loans have been suspended since March 2020 as part of pandemic relief approved by Congress and subsequently extended thanks to executive actions by then President Donald Trump , and President Joe Biden.
The Biden administration recently extended until January 2022 the payment freeze and the zero-rate benefit, which apply to approximately 40 million Americans. February.
The Navient accord further complicates this process as it is simply the last federal student loan manager to seek to drop out of the program. About 16.5 million student loan borrowers will now have a new company to manage their loans in the coming months.
Besides Navient, two other loan managers – the Pennsylvania Higher Education Assistance Agency and Granite State – have announced that they want to leave the loan management program.
Meanwhile, Education Department officials last week extended the contracts of two other companies that collect federal student loans, Nelnet and its subsidiary, Great Lakes, for another two years. The contract extensions include new requirements for companies to adhere to state consumer protection laws and more broadly report data to the Department of Education.