The Biden administration has come under growing pressure to cancel student loan debt. There was even a proposal to cancel at least a portion of that debt, with proponents of this initiative calling on the cancellation of up to $50,000 per person. Lawmakers in Congress are also taking a keen interest in student loan services that process these loans on behalf of students.
The services have been accused of not providing all the necessary information needed by students to make an informed choice. As a result, many of these young people have found themselves under a mountain of debt soon after they have completed school. This attention by Congress has been spearheaded by Elizabeth Warren, the chairperson of the Senate subcommittee on economic policy.
It’s not the first time Warren has set her sight on student loan processing services. In fact, since 2006, the senator from Massachusetts has accused student loan processing companies, including Navient, the largest of them all, of misusing the process and taking advantage of uninformed students.
Warren even wrote a column in the democratic journal calling for the creation of a financial product safety commission that would provide protection from deceptively marketed student loans.
During her first hearing as the chairperson of the Senate subcommittee on economic policy, the senator from Massachusetts faced Navient CEO John Remondi alongside other 10 witnesses who were planned to testify in Congress. Warren noted that it’s the job of the federal government to make sure that student loan servicing works for the students and not the big corporations running this process.
The senator accused Navient of having a long history of cheating and misleading borrowers in what she calls a blatant abuse of the loan servicing process that only serves to enrich a few people. Warren even called on the CEO of Navient to be fired as a result of these practices. But the company maintains that the senator’s claim is “false and misleading.”
But despite this, Navient has come under a lot of scrutiny based on how it deals with student loan servicing. In fact, in 2014, the company was fined $97 million by the federal government for violating the Servicemembers Civil Relief Act. The company was accused of charging high interest rates and late fees on active service members.
The Obama administration tried to put in place measures that would make it hard for companies that have a track record of misleading and abusing student borrowers from getting servicing contracts from the federal government. But that all changed when the Trump administration reversed all these measures.
Warren was enraged with this move calling out former education secretary Betsy DeVos for giving companies like Navient a pass. But now that the Democrats control both the White House and Congress, there could be so many far-reaching changes on student loans and how it's managed over the coming year. Warren is expected to lead this charge moving forward and she looks like she’s ready for the fight.