September 13, 2022

At Hearing, Senator Warren Scrutinizes Student Loan Servicers Following Reports of ‘Outrageous’ Tactics

Warren Warns Navient’s Misleading Guidance Could Cause Borrowers to Lose Eligibility for Cancellation

Washington, D.C. – At a hearing of the Senate Banking, Housing, and Urban Affairs Committee today, U.S. Senator Elizabeth Warren (D-Mass.) asked Ms. Rachel Gittleman, Financial Services Outreach Manager, Consumer Federation of America, about Navient’s long track record of using misleading tactics to work in their own financial interests rather than in the interest of student borrowers.

“While families breathe a sigh of relief, corporations that made billions off a broken student loan system are now busily laying new traps in a shameless, last-ditch effort to try to line their pockets,” said Senator Warren.

Following President Biden’s historic announcement that he would cancel up to $20,000 in student loan debt for as many as 43 million Americans, Navient, one of the nation’s largest loan servicers, sent multiple emails to borrowers marketing refinancing options that would lower their interest rates, while noting only in the fine print of the email that refinancing could put them at risk of losing cancellation under the President’s plan.

The Senator pointed to a letter sent to Navient’s CEO, John Remondi, in which she called out the company’s grossly misleading guidance for borrowers. In the letter, the Senator requested information regarding the details of Navient’s correspondence and asked the company how it plans to notify and inform borrowers about President Biden’s cancellation plan and other announced student loan reforms.

“Look, this is outrageous behavior, and it’s why I sent letters to Navient and to other loan servicers yesterday asking them what steps they’re taking to ensure that consumers receive timely and accurate information about their loans and their eligibility for cancellation,” said Senator Warren.

In November 2021, Senator Warren sent a letter to Maximus, the company that is assuming Navient’s federal student loans servicing contract, questioning its troubling history and seeking assurances that borrowers will receive appropriate services and protections during the transition.
Last November, Senator Warren also sent letters to the heads of Pennsylvania Higher Education Assistance Agency, Granite State, and Navient calling on them to correct past errors with borrowers’ accounts and address growing concerns over their preparedness to transfer millions of borrowers to new servicers.
In April 2021, Senator Warren questioned Jack Remondi, CEO of Navient, on the company's long history of abusive and misleading behavior towards borrowers and their profiting off the broken student loan system.

Transcript: Senate Banking Committee Hearing “New Consumer Financial Products and the Impacts to Workers”
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Tuesday, September 13, 2022

Senator Elizabeth Warren: Thank you, Mr. Chairman.

So last month, President Biden made the historic decision to cancel up to $20,000 in student loan debt. This is going to deliver life-changing relief for as many as 43 million middle-class, working class Americans. It’s going to be nurses, truck drivers, nail technicians, and millions of people who weren’t able finish their degrees.

So while families breathe a sigh of relief, corporations that made billions off a broken student loan system are now busily laying new traps in a shameless, last-ditch effort to try to line their pockets.

Navient, one of the world’s largest and worst loan servicers, is now leading the way. According to reports, immediately after the cancellation was announced, Navient sent multiple emails to borrowers encouraging them to refinance their federal loans under Navient’s private lender, NaviRefi, with the promise of lower interest rates.

Now Ms. Gittleman, your organization has a long history of protecting consumers from student debt scams, so I want to ask you. Let’s say a borrower decides to take Navient up on their offer and refinances their federal loans with a NaviRefi tomorrow. What would this mean for cancellation under President Biden’s plan?

Ms. Rachel Gittleman, Financial Services Outreach Manager, Consumer Federation of America: Thank you Senator Warren for the question. If they refinance with NaviRefi, then they will essentially be replacing their federal student loans with a private student loan. Because only federal student loans are eligible for cancellation, that means they may no longer be eligible for that cancellation. That’s a huge loss for borrowers eligible for cancellation, but Navient only mentioned this in the fine print at the bottom of those emails.

Senator Warren: So they could be forfeiting $10,000 to $20,000 worth of debt cancellations. In other words, right after the President announced student loan cancellation, Navient sent out millions of notices to people who could be eligible, encouraging them to refinance so they would NOT be eligible for debt cancellation.

Now, we don’t know at this point exactly which borrowers Navient sent these emails to, although I’ve sent a letter asking for more information from Naivent. But it appears that instead of sending borrowers information to help them get the cancellation that they may be entitled to, Navient pushed borrowers toward loans that could, at best, complicate their ability to get cancellation.

Ms. Gittleman, does Navient make more or less money if its borrowers get their loans canceled?

Ms. Gittleman: The future of Navient’s lending business depends on its ability to take the most credit worthy people with federal student loans and refinance them into private loans. Every borrower who was debt-free as a result of President Biden’s action is one fewer prospective customer for Navient. More broadly, the better the deal the federal government offers borrowers with federal student loans, the less opportunity Navient has to sell people its private loans.

Senator Warren: So I just want to underscore what you just said. Every borrower who is debt-free is one less borrower for Navient to profit from. I think that was a fair summary. Is that right? So no wonder Navient is trying to steer borrowers away from cancellation. Look, this is outrageous behavior, and it’s why I sent letters to Navient and to other loan servicers yesterday asking them what steps they’re taking to ensure that consumers receive timely and accurate information about their loans and their eligibility for cancellation.

By the way, this is not the first time that Navient has been caught trying to take advantage of borrowers. Between 2009 and 2019, there were at least ten incidents where Navient, or its corporate predecessor Sallie Mae, was accused of or fined by federal and state regulators for actions that ripped off borrowers – including steering borrowers to repayment options that actually made it harder for them to pay back their loans, failing to report borrower complaints, and harming disabled veterans’ credit reports.

Policymakers need to keep a close eye on servicers to ensure that borrowers are protected as they await debt cancellation, and I’m going to continue fighting to make sure that happens.

Thank you, Mr. Chairman.

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