Student Loan Processor Navient Outsourcing Portfolio To Competitor MOHELA – Forbes Advisor – Technologist

Almost 3 million borrowers will soon have a new student loan servicer.  Navient—once a major player in the student loan servicing industry—has announced plans to outsource the servicing of its remaining accounts to competitor MOHELA.

The move will affect 2.7 million borrowers with active private student loans and Federal Family Education Loan Program, or FFELP loans. FFELP loans were issued by private lenders but backed by the federal government. That program ended in 2010, but there are still a number of borrowers with those loans.

The transfer will begin sometime this year and take up to two years to complete, according to a news release. Navient is looking to eliminate almost $400 million in operating expenses.

Navient has already exited the federal student loan servicing business. In October 2021, the company transferred all of its Department of Education loan accounts to Maximus, another loan servicing company.

Navient was originally a part of Sallie Mae. In 2014, the company split its loans servicing and recovery business from its consumer bank business and rebranded the loan servicing and collection arm.

Navient, MOHELA Loan Servicing Under Past Scrutiny

Navient’s choice of MOHELA has raised red flags with some student borrower advocacy organizations.

In October, the Department of Education withheld $7.2 million in payments to MOHELA, saying it failed to send timely billing notices to 2.5 million borrowers, causing 800,000 of them to become delinquent on their loans.

Navient has also had its share of trouble with its student loans. Since 2017, Navient has been involved in several lawsuits claiming that the company steered borrowers into costly, long-term forbearance periods, failed to notify income-driven repayment borrowers of annual recertification requirements and engaged in several other deceptive practices.

Navient ultimately agreed to pay a $1.9 billion settlement, which included $95 million in compensation for federal student loan borrowers in 32 states. The company denied any wrongdoing.

“In selecting MOHELA, Navient found its corporate soul mate—a firm that is fundamentally incapable of delivering high-quality service to its customers,” said Mike Piece, executive director of the Student Borrower Protection Center, in a statement.

Timeline for Borrowers To See Changes Not Yet Clear

It’s not known yet exactly when the switchover will begin, or when MOHELA will begin communications with the affected student loan holders.

A news release announcing the loan servicing transfer said, “Navient and MOHELA will work toward ensuring a seamless transition in the coming months and providing customers with uninterrupted servicing of their loans.”

If you have a Navient loan and are interested in switching lenders before the MOHELA transfer, you can do so by refinancing your student loan with a private lender.