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.
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."