Sen. Elizabeth Warren (D-Mass.) on Tuesday accused student loan servicing giant Navient of pushing its borrowers to refinance their federal loans into private ones, which would make them ineligible for a loan forgiveness program announced by President Biden.
Under a plan unveiled by the White House last month, individuals making less than $125,000 would qualify for up to $20,000 in forgiveness of federal student loans serviced by the U.S. Department of Education. Private student loans are not eligible for forgiveness by the federal government.
Warren, during a Senate Banking, Housing and Urban Affairs Committee hearing, said Navient began persuading borrowers to refinance their loans around the time of the White House’s announcement, in what she characterized as an effort to keep the company’s profits up.
“While families are breathing a sigh of relief, corporations that made billions of dollars off a broken student loan system are now busily laying new traps in a shameless last-ditch effort to try to line their pockets. Navient, one of the world’s largest and worst loan servicers, is now leading the way,” Warren said.
“It appears that instead of sending borrowers information to help them get the cancellation that they may be entitled to, Navient pushed borrowers toward loans that could at best complicate their ability to get cancellation,” she said.
Warren, along with Rep. Ayanna Pressley (D-Mass.), sent a letter to Navient President and CEO John Remondi asking for clarification of its business practices. The lawmakers asked Remondi how many borrowers received such solicitations, what information they were provided, and how Navient was ensuring its borrowers “receive the accurate and timely information to secure relief.”
Navient said in a statement to The Hill that it made clear to borrowers the potential repercussions of refinancing.
“NaviRefi’s promotional emails, website (navirefi.com) and application and approval processes include clear, comprehensive and numerous statements designed to help borrowers understand the terms of private loans,” said a spokesperson.
Business Insider reported that Navient had informed customers that they had the option to refinance their loans with its private arm, sometimes with the promise of lower interest rates. But that could mean loans that could have been eligible for cancellation no longer would be.
Warren accused Navient of not making it clear to consumers that changing the type of loan would result in borrowers not being allowed to participate in the forgiveness program.
“This is not the first time that Navient has been caught trying to take advantage of borrowers. Between 2009 and 2019 there were at least 10 incidents where Navient or its corporate predecessors Sallie Mae was accused of or fined by federal and state regulators for actions that ripped off borrowers,” Warren said.
Rachel Gittleman, the financial services outreach manager for the Consumer Federation of America, said that the future of Navient’s business hinged on being able to take “the most creditworthy people” with federal student loans and refinancing their loans into private loans.
“Every borrower who is debt-free as a result of President Biden’s action is one fewer prospective customer for Navient,” Gittleman said.
Updated: 6:30 p.m.