Navient, one of the largest student-loan companies, unveiled plans to end its federal loan services.
Elizabeth Warren said its exit will make the federal student-loan industry “far better off.”
She cited decades of abuses by the company, including pushing borrowers into deeper debt.
The student-loan industry on Tuesday received yet another major shake-up when Navient became the third company to announce its plans to end its federal student-loan program amid a regulatory crackdown over the last year.
Massachusetts Senator Elizabeth Warren had one message for the company: good riddance.
“Navient has spent decades misleading, cheating, and abusing student borrowers,” Warren told Insider in a statement. “The Federal student loan program will be far better off without them.”
Navient, which collects the federal student debt of six million borrowers, said in a press release that it is working with the Education Department to approve the transition of those borrowers to another student-loan company, Maximus.
The announcement follows the Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources announcing in June they will be ending their servicing contracts this year. With Navient following their lead, close to 16 million borrowers will be paying their student debt to new companies once the payment pause lifts in February.
Navient CEO Jack Remondi said in a statement that “Navient is pleased to work with the Department of Education and Maximus to provide a smooth transition to borrowers and Navient employees as we continue our focus on areas outside of government student loan servicing.”
Warren, who has held both PHEAA and Navient in her sight for decades, has been clear that their plans to shut down is a good thing for borrowers. She said in June that the 8.5 million borrowers serviced by PHEAA could “breathe a sigh of relief” since they would no longer have to deal with the company, and Warren told Insider in a July interview that “the days are over” when student-loan companies could do “a terrible job.”
“The world has changed for student-loan-debt servicers,” 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 to hold Navient accountable since even before she was elected to the Senate. Insider reported in April on the comprehensive history Warren has with Navient, starting in 2006 when she was interviewed on “60 Minutes” and cited Sallie Mae, as Navient was formerly known, for its abuses of the student-loan system.
Since then, she has repeatedly called out the company for unlawful practices with borrowers, like in November 2018, when Warren released an audit providing evidence of Navient’s record of causing students to go into deeper student debt by “steering student borrowers into forbearance when that was often the worst financial option for them.”
And most notably, during an April hearing where she invited the CEOs of all the student-loan companies to testify, she told Navient’s CEO, John Remondi, that he should be fired for the abuses that happened under his leadership.
Richard Cordray, head of the Federal Student Aid (FSA) office, said during remarks at a conference earlier this month that student-loan companies are choosing to shut down rather than face more accountability. To be sure, he did not comment on specific companies but noted that “not everybody was thrilled” with his plans to strengthen oversight of the industry.
Warren told Insider that even though the three companies are ending their student-loan services, she will “continue to fight for greater accountability and better service for borrowers during and after the upcoming transitions.”
“Ultimately, the student loan system is broken,” Warren said. “The only way to guarantee that borrowers do not face the same predatory behavior from Navient’s replacement is to cancel student debt, so that no borrower’s future is held hostage by corporations profiting off their financial distress.”
Read the original article on Business Insider