Navient Quits: What It Means For You

It's fair to say that the Department of Education is hemorrhaging companies willing to collect payments for federal student loans. On September 28, 2021, Navient announced its desire to quit the federal student loan servicing business and transfer its 6 million borrower accounts to a company called Maximus.

NOTE: Department of Education has approved this request, meaning borrowers will start to see their student loan accounts being transferred. However, Maximus created a subsidiary to service these federal student loans called Aidvantage. When we refer to Maximus in this article, we are really referring to the legal entity Aidvantage, which will be your student loan servicer if you had Department of Education owned loans at Navient.

This announcement comes on the heels of the FedLoan Servicing announcement only weeks prior, where it too desired to exit the federal student loan servicing business.

As over 40 million student loan borrowers enter repayment again on August 29, 2023, they will have experienced almost two years of no payments or interest. Transferring nearly half of the federal student loan portfolio to new companies will likely cause headaches, anxiety, and servicer mistakes. Yet, borrowers paying close attention to articles like this one needn't worry for reasons I'll explain.

We'll cover what to do if Navient is your servicer, along with the likely reasons why Navient decided to stop servicing federal student loans and what it means for you.

Download Our New IDR Calculator

Navient quitting servicing was already supposed to happen

For those who don't follow student loan policy closely, this announcement might seem like a shock. However, we've known that Navient would likely be fired at some point for a long time now.

During the Trump Administration, the Department of Education announced the new servicers it wanted to manage its portfolio under the Next Generation (“Next Gen”) contract. Navient was not among the contract winners.

Navient wants to transfer its loan servicing responsibility to a company called Maximus.

Maximus was already awarded a contract to manage federal student loans under the Trump Administration.

In other words, Navient essentially decided to accept the results of the contract bidding process and went a step further than FedLoan in identifying its desired successor Maximus, which was already chosen as one of the new servicers anyway.

Maximus is an odd choice to takeover from Navient

One significant point of concern: Maximus is the company that currently manages defaults and collections for the federal student loan system. They have little experience guiding millions of borrowers who do not face financial hardship and simply wish to enroll in various student loan repayment program options.

The government has done a poor job managing student loan defaults. Pre-pandemic, a double-digit percentage of student loan borrowers were in default despite generous income-driven repayment plan options.

Borrowers concerned that their loans would be serviced by a company more familiar with collections have a right to be worried.

Navient had lots of reasons to quit federal student loan servicing

Pretend you run Navient, and you're looking at your revenue sources. You see that federal student loan servicing is approximately 5% to 10% of your revenue (which is accurate, by the way).

90%+ of your negative headlines come from this business line.

90%+ of lawsuits targeting your company are due to student loan servicing.

The Department of Education recently allowed states to begin oversight of your company, which would require hiring substantially more compliance and legal help.

You need to hire hundreds, if not thousands, of new call center representatives at low wages despite many of your target prospects having better job opportunities elsewhere because of the pandemic labor shortage.

Now, add to all these above points that Navient is not very good at servicing federal student loans.

From an anecdotal standpoint, from most to least complaints received from Student Loan Planner readers, here's how I would rank the servicers:

1. FedLoan (most)
2. Navient
3. Nelnet
4. Great Lakes (least)

Based on the above issues, it's clear why Navient would want out of the federal student loan servicing business.

Navient's exit probably made money for Great Lakes and Nelnet

Great Lakes and Nelnet recently signed a two-year contract extension with the Department of Education to service federal student loans.

Education probably did this because after losing Navient AND FedLoan, they decided it would be a disaster to lose any more servicing companies.

Hence, they probably had to pay a premium to Great Lakes and Nelnet (both owned by the same parent company) to stick around.

Should borrowers be worried about Navient quitting?

If you're reading this article, do not be worried about Navient quitting federal student loan servicing.

I'm worried about the borrowers who are lower information consumers who will find out about everything reactively instead of preparing proactively.

You will see plenty of articles telling you to download your payment and loan information from Navient's website.

I agree that you should.

However, even if you forget to do that, you shouldn't worry.

We have advised on over $1.5 billion of student loans for over 6,000 individual borrowers one-on-one with our consulting team. So, we know that your payment history found on Navient's site isn't as important as you might think.

The NSLDS file is really what matters, not Navient payment history

When we're figuring out the best course of action for a borrower, we reference a document called the NSLDS file. NSLDS stands for National Student Loan Data System, and it's the Department of Education's central record for student aid.

When you log into the NSLDS, you can access and download your NSLDS file in a TXT file format from the official studentaid.gov website. It has all of the information for your loans stored in one location, including FFEL, commercially owned FFEL, and Direct loans.

If Navient shut down its website tomorrow, the NSLDS file is what we would reference, and we almost never ask a borrower to log in to their servicer website for information. That's because the government NSLDS file already has it.

So, to anyone worried that Navient (or FedLoan, for that matter) will lose their information in the transfer — don't worry.

Progress towards income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PSLF) is saved in this independent, government-owned website location.

Occasionally this file is incorrect, but it's rare. The most common problem we've seen with the NSLDS file is data coding problems from FedLoan Servicing when dealing with six-figure consolidation loans. Navient luckily has had fewer errors in uploading information to the federal NSLDS file from our experience.

Could Navient quitting mean an extension of the CARES Act student loan payment and interest relief?

The Department of Education has been following contract discussions between Navient and Maximus for a while now, according to Federal Student Aid Chief Operating Officer Rich Cordray.

That means the Department of Education likely already knew about this development when it decided to extend the pandemic student loan relief “one final time” until August 29, 2023.

Therefore, we expect that student loan payments and interest will begin again on schedule, with most borrowers needing to make their first payment around the end of February.

Action steps to take before Navient shuts down

Here are some actions you can take now to preserve your sanity as Navient transfers your federal student loans to a new servicer:

1. Download your NSLDS file at the federal student loan website we linked to.
2. Make a folder in Google Drive or Dropbox called “Student loan info” or something like that.
3. Place a copy of your NSLDS file in this folder.
4. Screenshot or download any additional information from Navient's website that you think could be relevant. Remember the NSLDS file will stick around even with the new servicer, so this is purely precautionary and will likely be unneeded.
5. If you have a problem with your payments or credit towards forgiveness, consider using the Consumer Financial Protection Bureau (CFPB) complaint portal to file a complaint before Navient is out of the picture.

Don't be concerned if you recently consolidated student loans or planned to pursue PSLF and are worried you'll lose payment credit. Just follow the steps above. Know that we're available to help if you want to hire professionals to make sure your student loan plan is good enough that it won't be affected by who the government hires to manage your loans.