2.7 million student loan borrowers across the country could be affected by Navient’s decision to transfer data to MOHELA, a company that has already been investigated and punished for a number of controversies.
Navient’s Loan Switch
Navient, a major private student loan servicer, has controversial plans to move its current loan data to MOHELA.
Impact on Loan Portfolio
This decision could affect 2.7 million current and former students whose loans are owned and serviced by Navient.
Statement to Transition
“Navient has entered into a binding letter of intent that will transition its student loan servicing to MOHELA, a leading provider of student loan servicing for government and commercial enterprises,” Navient said in a statement.
Transition Timeframe
The outsourcing initiative, set to take place this year, will take around 18 to 24 months, but it hasn’t come without its controversies.
A Seamless Transition
The statement from Navient said, “Navient and MOHELA will work toward ensuring a seamless transition in the coming months.”
Outsourcing Decision
MOHELA is one of the federal student loan servicers, and Navient says that the transition process is set to commence this year.
Business Simplification Goals
Navient’s President and CEO, David Yowan, said that the move’s objective is to “simplify our business, reduce our expense base, and increase our financial and operating flexibility.”
An Uninterrupted Service
Navient assured that during the transition process, they would provide “customers with uninterrupted servicing of their loans.”
MOHELA’s Controversial Status
Critics are concerned over the selection of MOHELA as the outsourcing partner, given its recent controversies surrounding customer service.
Scrutiny and Errors
MOHELA has been under the microscope for sending late bills to borrowers and even taking out incorrect direct debits from bank accounts.
MOHELA’s Punishment
MOHELA faced repercussions in October when the Education Department penalized the company for failing to provide timely billing statements to 2.5 million borrowers, resulting in the withholding of over $7 million in pay.
Cracking Down on Service Providers
The Education Department said in a statement, “The department will continue to conduct stringent monitoring of all servicers.”
Improvements to Services
The department also insisted it had “instituted several strategies to detect any errors swiftly and take corrective action to hold servicers accountable for meeting their obligations.”
Scrutiny on Navient
Navient also faced accusations of predatory behavior by Democratic lawmakers, including Sen. Elizabeth Warren.
Misleading Customer Allegations
Warren accused the company of misleading borrowers to purchase products that they couldn’t afford.
CEO’s Response to Allegations
Navient’s CEO, John Remondi, dismissed allegations during a 2021 hearing, asserting, “These allegations are not true.”
Full Steam Ahead Despite Concerns
As the Education Department shows its concerns about the transition to MOHELA, both companies seem set on making this as smooth a transition as possible.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
