The CFPB’s 66-page complaint details years of alleged maleficence that Navient president and chief executive Jack Remondi disputes. He insists that the company he has led for nearly three years has a strong track record of keeping people out of default and enrolling them in affordable repayment plans despite the constraints of the poorly designed federal student loan program. Remondi shared his opinion of the flurry of lawsuits and why Navient will fight them all. Here’s an edited version of our conversation:
What’s your reaction to the lawsuits that were filed against Navient?
We’re obviously extremely disappointed. We had been working with the regulators, particularly the CFPB since their inception, to find ways to improve the student loan program. The complexity to this program is outrageous, and is certainly very impactful in terms of how it works for borrowers. The most frustrating part for us is despite five years of effort, there really has been zero action to improve the program. Instead, they have sought to force standards on one servicer and apply those standards retroactively, both of which we think are very unfair.
We have over the course of time recommended a number of changes to the student loan servicing standards that we think would have significant impacts in improving borrower outcomes. A year ago, for example, we told the Department of Education we were going to run a pilot on verbal [income-driven repayment] enrollment, which we would take the IDR application information over the phone, something we’re not allowed to do today; we’re not even allow to co-browse with the borrower as they complete the form on the department’s website. We’d run a pilot and see how that improved enrollment rates and outcomes for borrowers. We asked the CFPB for help in promoting this with the department. The department told us no and we got no assistance from the bureau in terms of implementing these changes. It [is] more than frustrating.
They make these accusations about our servicing performance hurting borrowers, but no one mentions the fact that who leads the industry in number and percentage of borrowers enrolled in income-driven repayment? We do. Who has the lowest levels of severe delinquency of federal student loan borrowers serviced? We do. Who has the lowest levels of defaults, 31 percent lower than everybody else? We do. Yet somehow what we do is harmful to borrowers. That part is impossible for me to reconcile.
Why do you think you’re being singled out? Why are federal as well as state authorities coming after Navient?
The bureau has decided that student loan servicers are the reason why borrowers default. They take the view that there are enough options in the student loan program that zero borrowers should default. I agree with the first statement [that there are enough options], but the second statement doesn’t reconcile with any kind of practice. When you have customers who have debt, student loans they’ve taken out for schools where they haven’t gotten a quality education, they haven’t gotten the job that they expected or they’ve failed to graduate, they’re not happy customers and aren’t generally looking for ways to pay for something that they don’t think they got value from. When you have that kind of lack of engagement, it’s very difficult to get borrowers into solutions that work.
Our data and statistics show that for the customers we service, nine times out of 10 when we connect with a delinquent borrower we’re able to get them in a program that keeps them out of default. A 90 percent success rate is pretty remarkable. On the flip side, 90 percent of the customers that default, that we service, have zero contact with us. They don’t respond to any of our outreach efforts to contact them during the year-plus it takes to default. We look at that and say how do we improve those results, how do we get in touch with borrowers? We do a better job at it than anybody else, but we still can’t make someone answer the phone or return a phone call or email when we reach out to them.
The entire time that the CFPB has been in existence, they have two different branches: They have supervision and they have enforcement. The person who is in charge of supervision that covers Navient has been to our office once. That’s it. No more contact. No more engagement, no nothing. The rest of the time it’s always been enforcement people. They’re the ones who began the process. With other student loan servicers, it’s been the flip. It’s been supervisory people that visited, no enforcement people.
When the lawsuits were announced, I received a flood of emails from your customers who had all sorts of complaints against the company. How do you respond to borrowers who say they are frustrated with the service they’re receiving from your company?
Some people are frustrated with the rules and regulations. The number one complaint that comes to me from our customers is asking for a courtesy credit bureau retraction. They’re trying to buy a house and they’ve had delinquent periods in the past on their student loan debt and it’s impacting their ability to get a mortgage. And we are not by law allowed to help them, and that becomes a complaint. We’ve had borrowers from the CFPB portal who will complain that their payment is too high, even though they are enrolled in an income-driven plan. Oftentimes, the issues that we get as complaints are things that are about program design and rules.
We’re the first to say we’re not perfect. We service 12 million borrowers and a heavy component of our interaction with customers is human based, so people do make mistakes from time to time. Our job is to identify those mistakes, find out what the root cause is and fix it. But again, I point back to the performance levels. If we were doing such a crappy job for consumers, why are our results so much better than any other servicer?
You mentioned the complexity of the federal student loan program earlier. How has that complexity affected your business?
Just think about the repayment-related process. We get a borrower on the phone. There are 56 different programs that a borrower in repayment can subscribe to, all types of deferments and forbearances to nine different income-driven repayment plans. Explaining those terms and conditions is obviously a very complex process. In the IDR application process, once we review the program with the borrower and pre-qualify them for the program, we have to send them away from Navient to studentloans.gov where they have to complete a 12-page application. They do it on the government’s website, either online or by printing it and filling it out. There are no edit checks in that process, so if a customer makes a mistake or selects the wrong program, it gets sent to us by the Department of Education. We then have to return it, tell the borrower they’ve made a mistake, fix it. All of those things are very time-consuming and complex.
Borrowers look to the servicer and say anything associated with my loan, I put the responsibility on them. We’ve asked the department to be able to co-browse with borrowers on the website to assist them in completing the application to make sure they complete it correctly. We’ve asked for the right to do verbal enrollment. We’ve argued extensively for simplification and received zero response or action. We’ve asked the CFPB for assistance in these areas as well. We meet with the ombudsman once a month to review areas of their interests and things we would be seeking their help on, and we get nothing. They’re just far more interested in solutions through enforcement actions and legal suits than they are through the rulemaking process they’re supposed to follow. CFPB, their responsibility in student loans was to issue rules and regulations and follow a rulemaking process, not to run around the country only doing enforcement actions. And unfortunately, they have done nothing on the rulemaking side of the equation.
The statement Navient issued in response to the CFPB lawsuit pointed to inconsistencies between the standards CFPB used in the case and Education Department regulations. Do you think there is conflict between the two agencies in how to manage and govern servicers?
There is a level of distrust between the two organizations and a lack of respect between the two organizations. What it results in is you don’t get consistency. We’ve argued and begged for clear and consistent rules for loan servicers, and have put forth a number of recommendations on that front. When somebody can come in, judge in arrears what somebody should have done based on what a borrower did or didn’t do several years later, and claim you should have done this, that’s not effective. It just makes it feel like everyone has to be defensive all of the time, instead of putting forward proposals and recommendations to actually improve outcomes for borrowers.
They make the claim that somehow we are economically better off by having borrowers default, by having borrowers in forbearance, it is completely false. The highest revenue we get from the Department of Education under our contract is a borrower who is current, which is more likely to happen for a struggling borrower if they are in an income-driven repayment plan. It’s 180 percent higher revenue if the borrower is current than if the borrower is in forbearance. It’s just false narrative, and really doesn’t show a lot of appreciation for how a servicing operation works.