Democratic senators send inquiry to student loan servicer, Maximus

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A group of Democratic senators sent an inquiry to student loan servicing company, Maximus, which has a federal contract with the U.S. Department of Education (ED).

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Maximus assumed the federal contract that Navient had with the Department of Education (ED). In October, Navient announced they are transferring their federal loan servicing contract to Maximus. Maximus will now service 5.6 million additional student loan accounts, bringing their total to nearly 13 million. The company currently manages a total of $449 billion of debt. Further, Maximus already services loans that are in default. The senators point out that Maximus has a substandard history as ED contractor for managing student loan accounts for borrowers in default. They are seeking assurances that borrowers will receive appropriate services and protections during the transition.

“Supporting our nation’s student borrowers as they manage significant and often debilitating debt is one of the most pressing issues facing ED and its contractors. As a servicer with a now expanded caseload of loans, it is important for Maximus to also do its part in this effort,” the senators wrote in a letter to Maximus officials.

The letter was signed by U.S. Sens. Elizabeth Warren (D-MA), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), Tina Smith (D-MN), and Chris Van Hollen (D-MD).

An audit conducted in 2015 by the ED’s Office of the Inspector General revealed that Maximus had failed to address deficiencies and needed modifications to the defaulted loan servicing platform that it manages. This resulted in ED paying inaccurate commissions and bonuses to Private Collections Agencies. In 2019, a federal judge found ED in contempt of court and fined it $100,000 for defying a court order to stop collection from protected borrowers defrauded by a for-profit college. This resulted in thousands of borrowers who were eligible for borrower defense to repayment — having their loan entered into default, and their tax refunds inappropriately seized, or their wages garnished. Maximus took the position in court that it has immunity because it is a government contractor.

In the letter, the senators raised concerns about the potential conflict of interest presented by Maximus’ role as the servicer for all student loans currently in default and its new role as a servicer for 5.6 million borrowers. They say Maximus has an opportunity to profit on loans in default through its existing contract to manage defaulted loans.

To ensure a smooth transition for new loans it will be servicing, the senators are asking Maximus about their plans for staffing, employee training, avoiding errors during the transition, communications with borrowers about restarting repayment, informing borrowers about the Public Service Loan Forgiveness Program, and safeguarding against conflicts of interest.

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