The student loan crisis we should work together to solve

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“I probably would have gone to a less expensive school or stayed in state or made different decisions.”
“I would pick a degree that actually paid decent money.”
“That decision [to not finish my degree] has crippled my job opportunities, and I’ve been regretting the decision.”
“The entire process is unbelievably and unnecessarily complicated.”

When I listen to calls and feedback from student loan borrowers, statements like these make it clear that the current student loan program isn’t working for everyone.

Making the system better for all is a goal shared by many across the spectrum, including consumer advocates, colleges and universities, members of Congress, and student loan servicers. While we all agree there is room for improvement and modernization, we are speaking different languages — often with heavy political accents. Instead of having a data-driven conversation that’s focused on the borrowers who need the most help, the various voices are talking over one another.

This higher education Tower of Babel is one of the largest obstacles standing in the way of a better system. That should change now.

Soon Congress is expected to begin work to reauthorize the Higher Education Act, and the U. S. Department of Education is starting over on a loan servicing contract procurement — offering all of these voices a chance to work together to reform the federal student loan program.

As the discussion begins, it is important to remember the federal student loan and other aid programs do work for the majority of borrowers and have made a college education possible for millions of Americans. A record 1 in 3 adults now has a college degree, and studies show college graduates are more likely to be employed, earn more, own a home, pay higher taxes and are even healthier. The key ingredient to these positive results is the college degree.

Unfortunately, too many attempt college and drop out before graduation.

New research we released with Ipsos shows that young adults who begin but don’t graduate have the lowest levels of financial health among all education levels, even compared to those whose education stopped at high school. For these individuals, even a small student loan can create a big financial burden.

Source: Navient + Ipsos 2017 Money Under 35 study of the financial health of young Americans

These non-completers are nearly three times as likely to default on their student loans compared to those who earned degrees, and for relatively small dollar amounts. According to President Obama’s Council of Economic Advisors, 35 percent of federal loan defaults were from those who borrowed less than $5,000, and two-thirds were from those who borrowed less than $10,000. Only 4 percent of defaults come from those who borrowed more than $40,000.

At Navient, we use data such as graduation status to develop strategies to reach people most at risk of default to help them learn about options that fit their needs, including payments scaled to their income. These efforts have helped drive down default rates. In fact, when we connect with a struggling customer, 9 times out of 10, we are able to help the borrower select a solution that prevents default. As a result, Navient-serviced student loan borrowers default at a 37 percent lower rate than borrowers serviced by other servicers.

Policymakers have the opportunity to apply similar data-driven solutions on a larger scale, and we have put forward a series of recommendations for program and technology innovations. But we’re not waiting. We continually pilot and implement new techniques that help borrowers successfully navigate the complex repayment landscape.

A system that truly empowers borrowers requires a holistic look at the entire process, not just the servicing that happens after the loan was made.

Consumers need better ways to make decisions about what course of study to pursue and whether and how much they will need to borrow to earn their degrees.

Federal student loans are available to all regardless of credit history, college readiness or course of study. Potential college students deserve more support than a no-questions-asked loan. They need better information and financial literacy resources up front to avoid the risks of borrowing without earning their degrees.

In addition, student borrowers need a simpler system for paying back.

Currently, there are 56 repayment options — up from 16 in 1990 — with a patchwork of inconsistent eligibility and recertification requirements.

Source: Data gathered from and other U.S. Department of Education public sites

Further, current federal requirements make enrolling in these programs too difficult.

An internal analysis found that even when borrowers have been prequalified for an income-driven repayment program and know how much lower their new monthly payment will be, only 30 percent complete all the necessary steps to enroll. A pilot we launched to increase document completion rates enabled customers to e-sign their forms and more than doubled completion rates. Other simple solutions such as allowing servicers to enroll borrowers in income-driven payment plans over the phone, and enabling borrowers pursuing loan rehabilitation to seamlessly enroll in plans tied to income, would also make a big difference.

Borrowers would also benefit from more voices encouraging them to contact their servicer if they need help. In fact, we find that an astounding 90% of borrowers who ultimately default — many whom are non-completers — did not respond to our outreach in the year leading up to default. Urging borrowers to engage is an easy and costless change that would produce immediate results.

The stakes are high.

An estimated 11 million students are currently enrolled in college full time, and nearly half of them have taken out federal loans. Yet, at current rates, as many as 4 out of 10 will not graduate, leaving them in many cases worse off than before they pursued college. This is the student loan crisis we should be working together to solve.

Jack Remondi is the CEO of Navient, supporting 12 million student loan customers in successful repayment.

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