Sen. Elizabeth Warren (D-Mass.) on Tuesday accused student loan servicing giant Navient of pushing its borrowers to refinance their federal loans into private loans, which would deem them ineligible for a loan forgiveness program offered by the president. Biden.
Under a plan unveiled by the White House last month, people earning less than $125,000 would qualify for a remission of up to $10,000 from federal student loans administered by the US Department of Education. Private student loans are not eligible for federal government forgiveness.
Warren, at a Senate Banking, Housing, and Urban Affairs Committee hearing, said Navient began persuading borrowers to refinance their loans around the time of the White House announcement, in what she characterized as an effort to maintain company profits.
“As families breathe a sigh of relief, the companies that made billions of dollars from a broken student loan system are now setting new traps in a shameless last-ditch effort to try to line their pockets. . Navient, one of the biggest and worst loan managers in the world, is now leading the way,” Warren said.
“It appears that instead of sending information to borrowers to help them get the cancellation they might be entitled to, Navient pushed borrowers into loans that might at best complicate their ability to get a cancellation,” she said.
Warren, along with Rep. Ayanna Pressley (D-Ohio), sent a letter to Navient President and CEO John Remondi asking for clarification on his business practices. Lawmakers asked Remondi how many borrowers received such solicitations, what information they were provided and how they “ensure your borrowers receive accurate and timely information to obtain relief.”
Navient did not immediately respond to The Hill for a request for comment.
Business Insider reported that companies such as Navient have told customers they can refinance their loans with its private arm, sometimes with the promise of lower interest rates. But this could result in loans that might have been eligible for cancellation no longer being owed to the person servicing the loan.
Warren accused Navient of not making it clear to consumers that the change in loan type would result in borrowers not being allowed to participate in the rebate program.
“This is not the first time that Navient has been caught trying to take advantage of borrowers. Between 2009 and 2019, there have been at least 10 incidents where Navient or its predecessor Sally Mae have been charged or sentenced to a fined by federal and state regulators for actions that defrauded borrowers,” Warren said.
Rachel Gittleman, financial services outreach manager for the Consumer Federation of America, said the future of Navient’s business hinges on being able to take “the most creditworthy people” with federal student loans and refinance their loans. in private loans.
“Every borrower who is debt-free as a result of President Biden’s action is one less potential client for Navient,” Gittleman said.