Navient, the largest federal student loan servicer, announced today they are planning to withdraw from their federal student loan servicing contracts, transferring the obligation to another servicing company, Maximus. This move comes on the heels of two other major servicers exiting the business of servicing federal student loans earlier this year.

Casual observers might
wonder if these companies are exiting the market because of a looming
crisis in student loan repayment. I don’t think that’s the case.

My hypothesis, though I don’t sit in any of the boardrooms where these decisions are made, is that working with lawmakers on the catastrophe of laws that govern federal student loan repayment is no longer worth the trouble. Lawmakers haven’t made it easy on these servicers, and when they’ve fallen short of providing flawless service, legislators have made a habit of calling them to Capitol Hill to chastise and humiliate them. Recently, these shenanigans have been used to lobby for bigger reforms, like free college and student loan cancellation, that would undermine the system entirely. 

Experts know that if they really wanted to fix the problem with repayment, they would fix the laws that govern repayment and stop using the servicing industry as a scapegoat. Navient may not have been perfect and there’s plenty of evidence they have made mistakes, but the experience and expertise they bring to the table will be a loss to our system of higher education finance — especially as we aim to bring borrowers back online repaying their loans after the pause granted throughout the pandemic.

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