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The Billfold

What Is Going On With Betsy DeVos, Navient, and Student Loans?

Let’s read some government documents together.

Photo credit: Cparks, CC0 Public Domain.

It’s hard for me to summarize what exactly is happening with student loans right now, first because it’s probably all going to change anyway and second because there are at least ten different variables, but let’s focus on just one variable: Navient, the student loan servicing and collection company.

Some background, to start: The Department of Education’s system of servicing student loans is an unruly mess. The government contracts with nine different companies and nonprofits to help borrowers pick repayment options and then collect their monthly checks. These organizations are legendary for their inept and negligent customer service — in 2015, the Consumer Financial Protection Bureau published an extensive report on the industry’s various failings, and this year, that agency sued the country’s single largest servicer, Navient, alleging it shortchanged borrowers by steering them into inappropriate payment plans among other acts of wrongdoing.

So the Department of Education contracts with student loan servicers, including Navient. The Consumer Financial Protection Bureau recently sued Navient for not helping student loan holders find the best payment plans for their financial needs. Navient, meanwhile, is arguing that it doesn’t have to steer people towards appropriate payment plans, and also the government’s rules are too complicated:

Navient chief executive Jack Remondi, in an interview with The Washington Post earlier this year, said the government has too many inconsistencies in regulations and standards governing servicing companies.

[…]

Navient officials struck a different tone last month in a motion to dismiss one of the lawsuits, stating that “there is no expectation that the servicer will act in the interest of the consumer,” a position that riled consumer advocates and borrowers.

So, yeah. Navient literally said that it doesn’t have to act in student loan holders’ best interests, which is worth noting because Navient is planning to buy a bunch of new student loans:

The day after disclosing plans to buy a $6.9 billion education loan portfolio from JPMorgan Chase, Navient said it continues to explore new acquisitions. Potential targets include “a number of banks” with portfolios of federally guaranteed student loans, as well as private loans, company CEO and President Jack Remondi told financial analysts during a Wednesday conference call.

So Navient’s going to buy up these student loan portfolios and then service them in ways that are not necessarily in the loan holders’ best interests. What’s Secretary of Education Betsy DeVos going to do about that?

In a letter sent on Tuesday, DeVos withdrew several policy memos from the previous administration involving consumer protections for student loan borrowers.

[…]

This may be good news for Navient, the largest student loan servicer.

Oooooh, can I read the letter? Maybe we can all read the letter together!

That doesn’t really say which consumer protections are going to be revoked, so I’ll dig a bit deeper. Here’s the June 30, 2016 memorandum from former Secretary John King, one of the three memoranda DeVos just revoked:

Here’s the TL;DR: King wanted student loan repayment to be “an experience that is simple and provides high level service to borrowers,” and to address “performance failures that involved borrowers being misled, ignored, or provided wrong information.”

Why would a person withdraw that memorandum? All it really says is “let’s make sure our student loan repayment services aren’t misleading loan holders,” which sounds like it would be a bipartisan goal.

What else is being revoked?

Oh goodness, this one’s 51 pages long. But I see “simplifying the repayment process” and “facilitating our oversight of servicing contractors” in the first paragraph, and I think I get the gist.

The problem with all of this facilitation and oversight is, of course, that it costs the taxpayers money. (That was in the DeVos letter, if you skipped it.) Never mind that student loan repayment, especially when loan holders are being “misled, ignored, or provided wrong information,” also costs people, who are taxpayers, money.

And yes, I’m sure lobbyists are involved too, the usual thing. Student loan servicing is a big industry.

So that’s… what’s going on. Or at least part of it. We’ll see what happens next.

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Nicole Dieker

Nicole Dieker

Freelance writer at Vox, Bankrate, Haven Life, & more. Author of The Biographies of Ordinary People.