For the past several years, Navient has been under the microscope.
Now, Navient’s CEO, Jack Remondi, offers five solutions for better student loans.
Here’s what you need to know.
Student Loans Statistics
According to Make Lemonade, there are 44 million student loan borrowers who collectively owe more than $1.5 trillion. The average student in the Class of 2017 owes almost $40,000 in student loan debt.
If you have a student loan, there’s a good chance that it is serviced by Navient.
Navient, which spun off from Sallie Mae, has about 12 million customers and services more than $300 billion of government and private student loans. Navient is one of the nation’s largest servicer of student loans and a Top 3 servicer of federal student loans.
Last month, California became the fourth and largest U.S. state to file a lawsuit against Navient for alleged unlawful business practices regarding federal student loans. According to the California attorney general’s office, about 1.5 million Californians have student loans serviced by Navient. Navient has called the allegations unfounded.
How Student Loan Servicers Play A Role In Your Student Loans
As Remondi notes, the role of a student loan servicer can become misinterpreted. As a result, student loan servicers can get held responsible for an array of student loan issues.
For example, let’s look at federal student loans. According to Make Lemonade, more than 33 million student loan borrowers hold approximately $1.1 billion in Direct Loans. Another 14.5 million student loan borrowers hold $301 billion in Federal Family Education Loans (FFEL).
So, how do student loan servicers play a role in your federal student loans?
- Interest Rates: Student loan interest rates for federal student loans are set by Congress
- Student Loan Terms: Student loan terms for federal student loans are set by Congress
- Student Loan Limits: Student loan limits for federal student loans are set by Congress
- Tuition and Fees: Tuition and fees are set by colleges and universities
- Amount of Student Loans Borrowed: Borrowers and their families choose which school to attend, which student loan types to borrow and how much to borrow
- Student Loan Issuance: The U.S. Department of Education issues federal student loans at interest rates set by Congress, distributes the proceeds to education institutions and then assigns the student loan borrower a student loan servicer.
It’s only after this process that student loan servicers – like Navient – work to assist student loan borrowers with student loan repayment, student loan forgiveness and other student loan questions.
10 Things Student Loan Servicers Don’t Do
When it comes to federal student loans, student loan servicers often take the blame for student loan problems. However, student loan servicers such as Navient do not:
- License schools to operate, whether they are non-profit or for-profit institutions
- Admit students to those institutions
- Determine the cost of tuition
- Determine student loan eligibility
- Determine student loan amounts or student loan terms
- Own a financial interest in the student loans
- Create federal student loan repayment plans
- Create the eligibility criteria and enrollment requirements for federal student loan repayment plans
- Provide financial advice about the total cost of earning a degree
- Advise students how much money in student loans they should borrow and whether that amount is reasonable
5 Ways To Address Student Loans
Navient believes that policymakers should focus on five major areas to improve higher education and address student loan debt:
1. Improve financial literacy and transparency
The most important thing you can do about your student loans is to become informed. Knowledge is power, and it is paramount to increase financial transparency and financial literacy.
If you have student loans:
If you plan to borrow student loans:
- Do you understand the true cost of your student loans, including estimated repayment terms?
- Is your intended starting salary enough to pay your projected student loan debt?
There’s no shame in not knowing the answer. Just get informed so you’re empowered.
2. Increase graduation rates
“No degree + student loan debt” is not an optimal formula. Simply put, these borrowers are stuck with student loan debt, but do not enjoy the economic benefits of a degree.
By improving graduation rates, student loan borrowers will be better positioned to repay student loan debt.
3. Simplify the student loan repayment process
It’s no secret that student loan repayment plans can be confusing.
While some student loan repayment programs offer student loan forgiveness, it can take up to 20-25 years to receive student loan forgiveness.
During this period, student loan borrowers pay a lower monthly payment – but watch their student loan balances grow. This is called negative amortization.
4. Helping borrowers pay off student loans faster
From making a lump-sum student loan payment to paying more each month, there are many ways to save money and pay off your student loans faster.
5. Encouraging borrower contact with student loan servicers
Knowing how to deal with your student loan servicer is key, including how to communicate in writing.
Don’t avoid your student loan servicer. If you’re facing trouble with your student loan servicer, reach out as soon as possible. Make sure you’re in the driver seat, and not a passenger along for the ride.
And remember, in some cases, you can change your student loan servicer through student loan consolidation or student loan refinancing.