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Consumers take issue with Aidvantage’s management of federal student loans

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clarification

An earlier version of this article misstated some of the Consumer Financial Protection Bureau complaints involving Aidvantage. The article has been corrected with additional information.

It has been barely three months since Aidvantage took over Navient’s portfolio of 5.6 million federal student loan accounts, but the new servicer is already running afoul of some borrowers.

The Consumer Financial Protection Bureau has received nearly 100 complaints from federal student loan borrowers involving Aidvantage, with concerns such as receiving bad information about their loans or incorrect account details. Others involved issues related to payment or different topics.

What Navient’s exit from federal student loan servicing means for borrowers

While the complaints represent a small fraction of the company’s accounts, consumer advocates are concerned this may be a foreshadowing of things to come. They say that if people are having trouble while federal student loan payments are paused, what happens when they resume?

“We’re very concerned,” said Persis Yu, policy director and managing counsel at the Student Borrower Protection Center, an advocacy group. “The company is taking over a large portfolio of student loans at a time when borrowers are especially vulnerable. And there’s a real question about whether they’re prepared.”

Maximus spokesperson Eileen Cassidy Rivera said the complaints filed with the CFPB have been addressed. Maximus has a unit dedicated to identifying inconsistencies in the service to borrowers and developing strategies to remediate them. The company says it is monitoring customer interactions for quality assurance.

“The 99 complaints filed with the [CFPB] … out of more than 6.9 million student borrower accounts, paint an untrue and unfair picture of Aidvantage,” Rivera said. “Half of the complaints have nothing to do with Aidvantage or what is in Aidvantage’s control. None of the complaints point to Aidvantage not being ready for return to repayment on May 2.”

Aidvantage is stepping into a new role at a critical time for the Education Department.

The agency is gearing up for 41 million people to resume repayment in May, two years after the federal government suspended the collection of most student loans in the wake of the pandemic. Several of its loan servicers are calling it quits, and lawmakers worry their departures could be disruptive as borrowers migrate back into the system.

One of the nation’s largest student loan servicers plans to cut ties with the Education Department

The department has also taken a tougher stance on holding loan servicers accountable for their performance under the leadership of Richard Cordray, who heads the office of Federal Student Aid. The former director of the CFPB developed a reputation for aggressive enforcement at the bureau. As a result, industry and advocacy groups are closely watching how FSA handles its contractors.

Against that backdrop, the complaints filed with the CFPB against Aidvantage are under scrutiny. They are noted in a report released Friday by the Student Borrower Protection Center and the Communications Workers of America accusing Aidvantage’s parent company Maximus of mismanagement.

Maximus, which offers back-end support for the Education Department’s portfolio of defaulted loans, said the report is inaccurate and grossly mischaracterizes its business. The company only follows the direction of the department on collection matters and has no say in determining whether the federal agency should pursue defaulted borrowers, as the report suggests, said Rivera of Maximus.

In addition to the CFPB complaints, the report includes an Aidvantage billing statement one borrower received in January, requesting payment the following month, but by then the Biden administration had extended the payment pause through May. Another notice obtained from an Aidvantage customer also featured the incorrect end date to the moratorium weeks after the administration announced the change.

In a statement to The Washington Post, Cordray at the Education Department said the federal agency is reviewing the examples provided in the report and will work with Aidvantage to address them.

“All borrowers should be able to count on timely and accurate information about their student loans,” Cordray said. “That is why FSA has renewed its partnerships with federal and state regulators, cleared roadblocks to state oversight by clarifying federal preemption rules, and negotiated new accountability terms in our recent contract extensions.”

Cardona resurrects student-aid enforcement unit disbanded by DeVos

The Education Department said it works with servicers to remediate any harm to borrowers and to implement a plan to avoid recurrences. If a servicer does not meet performance standards, FSA can withhold payment or allocate fewer new accounts.

Asked if the department has received any complaints about Aidvantage, the agency said it has and has reviewed those filed with the CFPB.

The CFBP confirmed the complaints about Aidvantage’s federal student loan servicing have been closed but couldn’t provide additional information on the specific resolutions.

“Since last year, we have expressed our serious concerns about servicing breakdowns as millions of borrowers see their loans transferred to a new servicer,” CFPB spokesman Michael Robinson said in an email. “We have been and will continue to hold the student loan industry accountable.”

Liberal lawmakers and advocacy groups have been critical of Maximus and questioned the department’s approval of its deal with Navient.

The National Consumer Law Center, where Yu formerly worked, and Justice Catalyst Law sued Maximus in 2020, accusing it of failing to cease collections on a past-due borrower despite their pending debt relief claims.

In November, a group of Senate Democrats, led by Sen. Elizabeth Warren (D-Mass.), wrote Maximus chief executive Bruce L. Caswell to raise concerns about perceived conflicts of interest and to question how the company would ensure a smooth transition for borrowers.

“It is critically important that your company perform at a high bar and with increased transparency to provide the best possible service to borrowers and end a history of loan servicer abuses,” the senators wrote.

In response to the congressional letter, Caswell assured that the company delivers “independent and conflict-free service to government clients.” The Education Department pays its loan servicers more for accounts that are in good standing than those in default, mitigating a financial incentive to let borrowers fall behind.

Caswell also said Maximus has added experienced staff, enhanced training and worked closely with the department on a comprehensive communications plan.

“Maximus appreciates the confidence FSA has placed in us to service student loan borrowers,” Caswell wrote. “We look forward to meeting the Department of Education’s highest standards for performance, transparency, and accountability by providing the stability and quality of service that student borrowers deserve.”

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