April 14, 2024
Millions of student loan accounts to transfer to servicing companies

Millions of borrowers will see their student loan portfolio transferred to another company as one of the country’s largest servicers has announced its plans to leave the industry.

Navient announced this week that it has filed a binding letter of intent with the State of Missouri’s Higher Education Loan Authority, or MOHEL, for the outsourcing of privately held student loan portfolios and commercial loans to the federal Family Education Loan Program.

Navient was formed a decade ago during the breakup of Sallie Mae, and has serviced both private and federal student loans. Mohela is one of the largest servicers of federal loans in the United States.

“Naviant has entered into a binding letter of intent that will transfer its student loan servicing to Mohela, a leading provider of student loan servicing to government and commercial enterprises,” Navient said in a press release. “Naviant and Mohela will work together over the coming months to ensure a seamless transition and provide customers with uninterrupted servicing of their loans.”

The press release said the outsourcing process will begin this year and last 18 to 24 months but Navient will retain ownership of the loans. According to business InsiderThis move will affect 27 lakh borrowers.

Navient Chairman and CEO David Yovan said the decision to outsource was intended to “simplify our business, reduce our expense base, and increase our financial and operational flexibility.”

Yovan’s statement continued, “In the long term, we believe these actions will enhance the shareholder value we derive from our loan portfolio and the returns we can achieve on business-building investments.”

In October, the Education Department stopped a $7.2 million payment to MOHELA because it “did not meet its core obligation by failing to timely send billing statements to 2.5 million borrowers.” That failure left 800,000 borrowers in default on their loans.

Mohela was not the only servicer to be penalized by the education department, which withheld small payment amounts from other companies earlier this year.

The criticism of MOHELA came after the government returned to loan repayments after a pause during the coronavirus pandemic and the organization has been servicing a large portion of the federal government’s direct loan portfolio.

Navient’s MOHELA selection has come under scrutiny due to its difficult handling of repayments.

Persis Yu, deputy executive director and managing attorney of the Student Borrower Protection Center, said forbes That “Regulators and lawmakers must take seriously the risks posed by this giant firm and immediately monitor the transfer of these accounts from Navient – ​​while ensuring that Mohela’s disastrous, hours-long call wait times, poor billing practices and Paperwork backlog should not cause collapse of the student loan system.

Click here to read more from the Washington Examiner

Yu also said that Navient’s move means MOHELA has become one of the “largest financial companies in the country.”

The return of loan repayments last fall brought difficulty to the market, which had seen more than 30 million student loan borrowers struggle with servicing transfers in the past two years before the Navient-Mohela deal.

Source: www.bing.com

Leave a Reply

Your email address will not be published. Required fields are marked *