The Woes of Navient, the Largest Student Loan Servicer

Largest Student Loan

Hello folks. Today I have a contributed post from Tyrel Luck, a fellow personal finance buff. He has a very interesting article to share with us on Navient, the largest student loan servicing company. If you have a student loan, or are just interested in the latest and greatest on what has been impacting the student loan market, then this is a must read. And why wouldn’t you, everything is more interesting when politics gets involved…

So without further ado, let’s hear from Tyrel…


Millions of students struggle to cross over the graduation line without taking on some form of student loan debt, whether public or private. Over the last few decades, the total student loan debt has grown exponentially, estimated at a massive $1.3 trillion spread over more than 40 million borrowers. Securing financing for higher education is a relatively simple process – all it takes is a brief application and a verification of school enrollment. Unfortunately, managing that student debt after graduation is a growing concern for borrowers and the federal government.

One of the companies tasked to work with borrowers to ease the process of managing student loan repayment is Navient, the largest student loan servicer of federal student loan debt. Navient has made headlines in the last few weeks of the year given the new administration’s potential push to revert power – and earning potential – back into the hands of private student loan servicers instead of the federal government. The company’s stock price jumped nearly 30% in the days after the election, but recent news has investors less optimistic about the company’s future in the world of student loan servicing.

Contract Woes

In early December, Navient lost out on a significant government contract that it had been banking on, especially after a weak fourth quarter. The contract, awarded to 7 other loan servicers out of 48 total bids, would have given Navient the ability to collect on defaulted federal student loan debt over the next ten years. The company has enjoyed tens of millions of dollars in revenue from a similar contract over the last 20 years, but that revenue-producing agreement ends in the upcoming year. Representatives from the Department of Education estimate that the value of that contract alone could produce as much as $417 million in revenue for the seven winning companies.

Debt collection is a lucrative business for student loan servicers, given that nearly one in every six borrowers throughout the country (3.6 million individuals) are in default on their student loans. Adding to the issue are the additional 3 million borrowers who are delinquent on their student loan repayment, meaning they are at least one month behind. Debt collection practices for student loans are more serious than other consumer debts, like credit cards or personal loans. The federal government has the ability to garnish wages and withhold tax refunds for borrowers who don’t repay, making collecting on debt an easier revenue-producing unit of a student loan servicer like Navient.

Why Navient Was Shut Out

Unfortunately for the company, the behemoth student loan servicer won’t have the opportunity to collect on the nearly $122 million in defaulted student loans in the upcoming years. Part of the reasoning behind the lost contract bid is the shaky ground Navient has been on with the federal government and the Consumer Financial Protection Bureau over the last three years. It’s debt collection subsidiary, Pioneer Credit Recovery, has come under fire for making inaccurate representations to student loan borrowers who were struggling to keep up with repayment schedules.

In an investigation spearheaded by the Department of Education, it was found that Pioneer failed to provide borrowers with information about the benefits of various federal programs which offer assistance with getting out of default with student loans. Some of these programs, like changes to credit reporting requirements and a waiver of specific collection-related charges, give student borrowers some hope that getting back on track is a real possibility. Pioneer, along with four other debt collection agencies contracted through the federal government, did not provide this information to borrowers when they were in contact. Instead, collection agents pressed borrowers for payment and were quick to move on to the next delinquent account.

In addition to problems with its debt collection department, Navient has been subject to a growing number of complaints relating to how it handles borrowers who are actively repaying their student debt. In one case, the Consumer Financial Protection Bureau sent Navient correspondence indicating it had found evidence of violations of consumer protection laws. In 2014, the company was accused of cheating service members protected under the SCRA by not providing an interest rate deduction while borrowers were on active duty. Additionally, numerous complaints have been filed with state and federal organizations regarding how the company applies additional payments to the benefit of the company, not the borrower.

The Future of Navient

In the days since the news of the lost contract for debt collection on federal student loans, Navient’s stock price has experienced a substantial decline. Representatives from the student loan servicer shared with investors that the singular contract did not represent all of the company’s revenue-producing activities, as it continues to service millions of loans for borrowers in active repayment. However, the lost contract and subsequent reduction in revenue generating by Pioneer Credit Recovery is a clear hit to the country’s largest student loan servicer.

Under the new administration, Navient may be able to recoup some lost revenue should a shift take place toward privatization of student loans in general. If that were to take place, Navient, along with other major players in the student loan marketplace including Nelnet and Great Lakes, may have an opportunity to generate higher revenues by stripping borrowers of certain income-based repayment plan options.

As it stands now, borrows with low income have the ability to repay their student loan debt based on a percentage of their earnings, not necessarily tied to a conventional amortization schedule linked to the total amount owed and the interest rate. In addition to removing lower payment options, the privatization of student loan servicing may come with higher interest rates for borrowers across the board.

The combination of these two potential changes in the student loan landscape could mean massive profits for student loan servicers – but a significant hit for borrowers who are already struggling to keep up with repayment. Some borrowers might be better off refinancing their students, transitioning to another servicer besides Navient. This could be a great choice, especially for those with credit scores greater than 750. Overall, changes to the student loan environment are needed to benefit the borrowers who want and are able to repay, but it has yet to be seen if the new administration will keep the focus there instead of on improving the bottom line of corporations like Navient.

Tyrel Luck is a personal finance enthusiast who took a special interest in student loans, especially after it became the second leading form of debt in the United States. Next on his list is to start a blog of his own.


Thanks for the great update, Tyrel, and best of luck to you on getting your blog up and running. You’ll find that it is a great personal finance blogging community. Don’t hesitate to reach out with any questions.






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  1. This is already the next crisis. There are no easy answers, and free college is about the furthest of those possible answers. I am an above average income earner however I did not let my children choose a private or out of state 40K a year type school. They went to state schools which also are not cheap anymore. PA state school this year 22K with room/ board / bull$hit fees etc. If we didn’t save a lot of money I would have made the commute instead of borrow to much and saved half that price.

    You can’t just let johnny go to some fancy out of state school or else you are doing your child a disservice. I say that meaning unless you can afford it. And afford it means have the money not qualify to borrow each year more and more. I have friends who have bad credit so they had their parents co-sign. So now grandma and gradpa are on the hook if this kid messes up. I’m not even close friends with them and I lose sleep over it.

    How many people know what they even want to do at 18 ? I did, but I realize how rare that is, and it worked out fine for me at a state school. The thought of coming out of school with 30,60 or 100K in debt is putting young adults so far behind it will ripple through are economy for decades to come. I think we are already seeing it with more and more people renting instead of buying homes, and I expect that to continue.

    1. I don’t know the answer either. Crazy to think that some are resorting to G’ma and G’pa signing off on the loans as well! Three generations getting tied up in the kiddos college…that doesn’t make sense.

      You make a good point about it leading to more folks renting than buying too, I’m sure that is a factor. The debt burden stemming from college, materialism and over-consumption leading to high credit card balances, and others can be quite staggering. And tough to expect the kiddos to navigate all those tough decisions. We need to be good role models and help develop their financial literacy along the way.

      Thanks for the great comment!

  2. The higher learning system in this country is in a sad state of affairs right now. Its a shame that kids/parents have to make such large investments to pursue their passions (or to figure out what their passions are).

  3. Ugh! I’m glad I’m not with Navient, but most borrowers are awful in their own ways. This entire system is so messed up. I’m hoping we can just pay cash for our kids’ educations to avoid this entire mess. Or hell, avoid college altogether, since a degree isn’t as valuable as it once was.

  4. I’ve been living in the States for 4 years, and still don’t understand why people have HUGE student loan debt. Couple of my friends sent their kids to a private school (with student loans of course) just because it’s private, and they think it will help their kids to make more money in a future.

    From the other hand, another friend of mine set a limit for his kids, based on the family budget:
    – in state School
    – First 2 years in a community college
    – Work while in school

    And you know, at least from what I see, these kids whose parents said NO to student loans are more motivated and focused. They already know what they should do, and how they should do it. And in addition to that, such a great blessing to start an adult life without burden of student loans

    1. I know people like that too! One person I knew even had a full ride offer to an in-state public university and declined it to opt for no scholarship at a private school ($45K+ / year)! It really isn’t worth it!

      I love those rules / limits your friend set up. What I did myself was take some college credit courses while still in high school, passed out some courses via CLEP Tests, and then took summer and winter courses at the community college. I was able to graduate in 3 years…saving that extra year of tuition while instead getting out in the real world to MAKE money!

      There are alternatives! Thanks for the great comment, Friendly Russian.

  5. Very interesting post and definitely sad to see a company not telling people in the general public about their honesty. This makes me think of Tony Robbin’s new Unshakeable book, and its explanation of how financial advisors can be so dishonest as well for their clients.

    I’m currently working to pay off my student loans as my next big milestone. I’m doing this through something I’ll call the student loan pool. The student loan pool is savings up enough money to pay off the loan at once, rather than making double payments each month. Why? I’d rather have money saved up for an emergency if it happens, then pay money to the loan service before increasing my cash flow. This is a decision that results with paying more since it means more interest on the principle throughout that time.

    What are your thoughts on that strategy?

    Thanks for sharing this, politics can be such a draggg.

    1. Hmm yeah I can understand that thought. How long do you think it would take you to save up enough to pay them all off? If it was going to take more than a year, I’d consider building up that savings account to an extent, then once you reach it start putting all additional excess cash flow toward double payments. It’ll give you some cushion in case of emergency, and also help save some on interest with the double payments. Thoughts?

      Thanks for the comment, Master Duke!

      1. That’s a great thought. Definitely think that’s a doable option especially dependent on the amount people have.

        Thanks for the reply – excited to read more of your posts. You’ve got a great blog.

    2. I like this more than the double payments rule, but would suggest a twist. When you make the minimum, it normally gets split across the loans if you didn’t consolidate. Whatever extra you want to pay just put on the most expensive interest rate loan. This is an area that should be done automatically which I think is related to the story of navient not doing what is in the best interest of the borrowers. We have 1 loan left after paying off 4, but that one is at 3.6, one of the others were over 6, so we paid that one first.

      1. That’s an awesome point. congrats on paying off those 6%ers! I will definitely keep this mind when starting to pay these suckers off lol.

        Did you refinance yours? I’ve definitely considered doing the Sofi refiance option.

        1. I am a parent matching my daughters payments as incentive for her to get them paid in full. (I paid a lot along the way, these loans served as skin in the game so to speak). The goal is to pay them off in a 1-2 years years. So for us it didn’t make sense to, and I didn’t really look into it. She had 5 small loans each with a different rate. So we paid them off in order of largest to smallest %.
          She has 1 left, somewhere in the 3’s that should be gone in 3-4 months or so.

          1. That is very kind of you to do four your daughter!! Definitely respect that. Mine are through one provider even though they have different loans, going to call them to see if I can pay off the higher ones first though. Thank you for the info :).

            I used an average of all the individual loans to decide if it was worth investing or paying them off first, thankfully the average is in the 4-5 range, so retirement investing + tax savings makes sense to put them second in priority to retirement accounts.

  6. I had to deal with Nelnet on my loans and man were they a nightmare. That was with me having them all consolidated into one loan and making on time and extra payments. I can’t imagine having to deal with them for 30 years… Ugh..

    Hopefully, this administration focuses on helping out the students and not the corporations, but since it’s a businessman in the office, not feeling too optimistic there…

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