One of the largest student-loan companies could be engaging in 'unconscionable' behavior by encouraging refinancing to federal borrowers, Elizabeth Warren and Ayanna Pressley say
Elizabeth Warren and Ayanna Pressley wrote a letter to Navient over its communication to student-loan borrowers.
They cited an Insider report that found companies are sending notices about refinancing to private debt.
This would make federal borrowers ineligible for Biden's recently announced debt cancellation.
Two Democratic lawmakers are worried a major student-loan company could jeopardize President Joe Biden's debt cancellation for some federal borrowers.
On Monday, Massachusetts Sen. Elizabeth Warren and Massachusetts Rep. Ayanna Pressley sent a letter — exclusively provided to Insider — to Navient CEO John Remondi requesting information on guidance the company is giving student-loan borrowers right now.
After Biden announced up to $20,000 in student-loan forgiveness for federal borrowers at the end of August, Insider reported that some student-loan companies, including Navient, were emailing borrowers about their options to refinance their federal debt to a private servicer. This could get them a lower interest rate, but it would make them ineligible for federal debt relief.
Warren and Pressley cited Insider's report in the letter to Remondi and said the "tactics are unconscionable: just weeks after President Biden announced his plans to provide student loan relief for millions of borrowers, Navient is attempting to place them into refinanced loans that are ineligible for relief."
"If these reports are accurate, they reveal a particularly nefarious and harmful last-ditch tactic by Navient to profiteer off of the hardship of borrowers that finally are within grasping distance of obtaining relief from their abusive student loans," they wrote.
For Insider's report, a Navient spokesperson pointed Insider to the fine print of the email, which disclosed that borrowers could be at risk of losing federal benefits like Biden's student loan forgiveness if they refinance. The spokesperson added that "for a number of years, we have reached out to prospective borrowers about their options to refinance to lower rates with NaviRefi," its refinancing tool.
But Warren and Pressley wrote that since these emails are coming amid a time of confusion following Biden's debt cancellation, they worry the communications could be "predatory" and steer borrowers into financial situations that are not the best option. They're requesting Navient respond to the following questions by September 26:
How many people received Navient's refinancing email after Biden announced debt cancellation?
How many borrowers have refinanced to private loans since Biden's announcement?
How does Navient plan to advise borrowers on Biden's announcement and other reforms?
What outreach is Navient doing for borrowers with FFEL loans, which are privately-held federal loans?
"Following President Biden's life-changing action to cancel student debt for millions of Americans, Navient appears to be misleading and misinforming student borrowers on their options – potentially keeping borrowers indebted with private loans while federal relief is in sight," Warren told Insider. "Alongside Congresswoman Pressley, I'm working to ensure federal borrowers receive accurate information regarding student debt cancellation and will continue oversight throughout the implementation of this policy."
Both Warren and Pressley have been vocal leaders pushing Biden to deliver student-debt relief for millions of borrowers. For even longer, Warren has been cracking down on what she calls predatory behavior by student-loan companies like Navient. Last year, Navient announced it would be ending its contract for federal loan servicing, and Warren at the time said the "federal student loan program will be far better off without them."
In November 2018, for example, Warren released an audit providing evidence of Navient's record of causing students to go into deeper student debt by "steering student borrowers into forbearance when that was often the worst financial option for them." During an April hearing where she invited the CEOs of all the student-loan companies to testify, Warren told Remondi that he should be fired for the abuses that happened under his leadership.
Before Biden announced broad relief, student-loan companies warned the Education Department that issues might arise with implementation of this plan on such short notice, with only a week before payments were previously scheduled to resume on September 1.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance — a group that represents federal loan servicers — wrote a letter to Education Secretary Miguel Cardona in August that the department gave companies "grossly insufficient notice to reprogram the massive and interwoven systems that handle loan accounts, provide appropriate system testing time, and also construct and implement revised communication plans."
Elizabeth Warren and Ayanna Pressley want to know how 9 student loan companies will avoid causing 'grave harm to borrowers' while implementing Biden's debt cancellation
In August, Biden announced up to $20,000 in federal student-loan forgiveness.
Elizabeth Warren and Ayanna Pressley requested information from loan companies on how they will carry out the relief.
They said that borrowers could face "grave harm" if companies fail to deliver accurate information.
Student-loan companies are tasked with carrying out President Joe Biden's student-loan forgiveness — and two Democratic lawmakers want to ensure the process goes as smoothly as possible.
At the end of August, Biden announced $10,000 to $20,000 in student-loan forgiveness for federal borrowers making under $125,000 a year. Massachusetts Sen. Elizabeth Warren and Rep. Ayanna Pressley want to ensure the nine companies who service those loans are prepared to implement that relief effectively.
In a letter provided exclusively to Insider on Monday, Warren and Pressley asked the heads of each of the companies to provide an update on how they plan to deliver "accurate and timely information" on the recently announced relief, along with other reforms to the student-loan system.
"Servicers must ensure that they are appropriately staffed to handle the increased volume of borrowers calling to get information about the administration's recent announcements, that they are providing accurate information to borrowers, that they have strong systems in place to ensure balances and payments are adjusted accurately, and that borrowers are notified about these changes on a timely basis," Pressley and Warren wrote.
"Failure to do so would cause grave harm to borrowers," they added.
The two lawmakers noted events that have already caused confusion with student-loan borrowers. They cited a report from Insider that found one company, Nelnet, mistakenly told some borrowers they had payments due on September 1 in August. And, in an accompanying letter, Warren and Pressley requested information from Navient following a report from Insider that found the company was giving borrowers the option to refinance their debt into private loans, making them ineligible for loan forgiveness.
"We're putting the servicers on notice," Pressley told Insider. "It's imperative that servicers provide borrowers with accurate and up-to-date information on their student loans. Thanks to President Biden's plan to cancel student debt, millions are now eligible for meaningful student loan debt cancellation and we need to ensure it is administered efficiently and felt by as many people as possible. Senator Warren and I want answers."
To ensure the companies are communicating effectively with borrowers on relief, the lawmakers requested information on the guidance the companies are sending out to borrowers surrounding broad student-loan forgiveness, reforms to the Public Service Loan Forgiveness (PSLF) program, and reforms to income-driven repayment (IDR) plans by September 26.
Last year, the Education Department announced reforms to PSLF, including a temporary waiver through October 31, 2022 that would allow past payments to count toward forgiveness progress, including those previously deemed ineligible. As the lawmakers noted, this expiration date is soon approaching and they want to ensure companies are communicating the timeline to borrowers — along with benefits borrowers can receive from a new, income-driven plan the department will roll out intended to lower monthly payments once the student-loan payment pause ends next year.
Even before Biden announced relief, lawmakers were expressing concerns with loan companies' abilities to effectively implement the relief. In a June letter, Minnesota Rep. Ilhan Omar led her Democratic colleagues in writing to the Education Department to ensure companies were prepared to "deliver debt cancellation quickly and efficiently, no matter the effort and resources required."
But the companies themselves have warned the department of issues that could arise with implementing this relief. Scott Buchanan, the executive director of the Student Loan Servicing Alliance — a group that represents federal servicers — previously told Insider that it could take "months to operationalize" Biden's announcement. He later wrote in a letter to Education Secretary Miguel Cardona that the debt relief "risks operational disruptions."
The department maintains it has the ability to carry out this relief and said borrowers should prepare to apply for loan forgiveness in early October.
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