It’s now official: The U.S. Department of Education has transferred 5.6 million federal student loan accounts to Maximus federal services. That means Navient is out of the loan servicing game, effective immediately.
But why are Maximus federal services replacing Navient? Who is even the Maximus student loan servicer?
U.S. Senator Elizabeth Warren and other senators like Sherrod Brown, Chris Van Hollen, etc., questioned Maximus’s troubling history. They wanted to know if borrowers would receive the appropriate protection and services during the transition.
There were even lawsuits against Maximus. So what’s going on? This guide will show you everything you need to know, especially if you’re part of the 5.6 million federal borrowers.
Here’s everything you need to know.
The Day Maximus Federal Services Took Over.
On October 20, 2021, the U.S. Education Department and Navient announced that the Maximus student loan servicer will now assume Navient’s position of servicing federal student loans. In addition, the announcement showed that borrowers would receive a welcome letter with more details.
However, back on June 24, 2020, the U.S. Department of Education updated its servicing alternatives on student loans. They awarded contracts to five student loan servicers, namely:
- F.H. Cann & Associates LLC
- Maximus federal services
- EdFinancial Services LLC
- Trellis Company
The Education Department terminated contracts with other loan servicers such as Nelnet and Great Lakes. Now, the company’s you’ve probably heard of are EdFinancial and MOHELA.
If you didn’t know, MOHELA uses the COMPASS software to manage its student loan accounts. PHEAA designs the software, and PHEAA is the parent company of FedLoan Servicing.
Whether the ED’s move is good or not, it shouldn’t affect you. We’ll show you how later.
In August, the Education Department announced that it’ll extend current loan servicing options through December 2021 or March 2022. But that will depend on the loan servicer. By then, Maximus student loan servicer was the authorized servicer for loans in default over 360 days.
Here’s what you need to know about Maximus if your student loans are transferred to the company.
What Are Maximus Federal Services?
Maximus student loan servicer is a private, for-profit company established in 1975. The company has had partnerships with state, local, and federal governments on human and health service programs.
Maximus had its first privatized welfare contract in Los Angeles back in 1987. One of their roles is to manage the Default Management Collection System. This is a platform used to service student loans in default. It also operates call centers for the U.S. Education Department’s Default Resolution Group.
In all, Maximus role is to:
- Process student loan payments
- Help borrowers change their account
- Offer educational and technical support
- Store and operate any its borrowers’ documentation
- Manages call centers and intake facilities
- Take care of all correspondence with its borrowers
Maximus’s contract value with the Department of Education is more than $194 million. And they will be taking over Navient’s student loans under the name Aidvantage.
Customer Feedback On Maximus Federal Services
There isn’t much information about borrowers’ opinions of Maximus as a student loan servicer. The company has a B+ rating on the Better Business Bureau. However, almost all of the complaints are other programs that Maximus manages.
The reason why there’s less information is probably that most student borrowers don’t know the company. In February 2020, a civil lawsuit was filed against Maximus alleging illegal collection practices against people who had sent claims for federal loan forgiveness based on borrower defense.
One of the claims that came out of this lawsuit is that the company doesn’t identify as a student loan servicer. That makes borrowers believe that any correspondence comes from the U.S. Education Department.
But a court ruled that Maximus isn’t above the federal consumer protection law. So the case of illegal collection practices can proceed to trial. The lawsuit is still ongoing.
Besides the lawsuit, U.S. Senator Elizabeth Warren is also questioning the company’s troubling history.
Elizabeth Warren Seeks Assurance From Maximus Student Loan Services
The U.S. Senator Elizabeth Warren, Richard Blumenthal, Chris Van Hollen, Sherrod Brown, and Tina Smith sent a letter to Maximus.
In that letter, they questioned Maximus’ questionable history and sought assurance that borrowers would receive the needed services and protection during the transition.
According to the senators, one of the critical issues that face the Department of Education and its contractors is supporting student borrowers as they manage massive debt.
The senators raised this concern because, in 2015, the Education Department conducted an audit. In that audit, they found that Maximus failed to address deficiencies and had to make modifications to the defaulted loan servicing platform Maximus managed.
Because of the deficiencies, the U.S. Education Department had to pay incorrect bonuses and commissions to Private Collection Agencies. As a result, a federal judge found the Department of Education in contempt in 2019. And they spent a fine of $100,000 after defying a court order to stop collecting from protected borrowers who a for-profit school defrauded.
As a result, thousands of borrowers who qualified for borrower defense had their student debts default. They also had their wages garnished, or tax refunds seized appropriately. Furthermore, Maximus said it had immunity because of its position as a government contractor.
Senator Warren And Her Colleagues Ask About Maximus’ Plans
Senator Warren and the other senators also raised concerns about the potential conflict of interest as Maximus manages current defaulted student loans and its new position as a loan servicer.
According to the senators, Maximus has the chance to profit on defaulted loans via its existing contract to manage student loans in default. So to understand the company’s plans to ensure smooth transitions for new loans Maximus will service, the senators asked about the company’s plans.
Specifically, the senators ask about plans for employee training, staffing, avoiding mistakes during the transition, informing borrowers about the PSLF, communicating about borrowers ready to restart repayment, and protecting against conflicts of interest.
Earlier in November, the senators sent letters to the heads of Pennsylvania Higher Education Assistance Agency (PHEAA), Navient, and Granite State to correct their past mistakes with borrowers’ accounts.
The letters also included the increasing concerns over their readiness to transfer millions of student borrowers to new servicers.
Will Maximus Federal Services Manage Defaulted Student Loans?
Maximus student loan services already had the contract of managing defaulted student loans before they got this new contract. So it’s logical that their previous role will continue with the current agreement.
The national student loan debt as of the third quarter of 2019 was at $1.5 trillion. Eleven percent of these debts are 90 or more days in default or delinquent. Now, even though there are income-driven repayment plans, defaults are skyrocketing.
But it shouldn’t be since low-income people should be able to pay zero dollars. That’s why many speculate that Maximus is probably not doing a good job. However, most loans were in default before Maximus took over. So we can’t shift all the blame on the company.
Why Is Maximus Federal Services Replacing Navient?
Maximus is widely known for its enormous human service, tech, and human service contracts with the U.S. federal government. The company aids in managing the Centers for Medicare & Medicaid Services.
The company got a $951 million contract to support the CDC’s COVID-19 national surge support and vaccine assistance hotline in May 2021.
While Maximus has recently shifted its focus to the healthcare industry, it already had strong links to the Education Department before the Navient acquisition. Maximus has worked on contracts for the debt management and collections system and the ED’s commercial operations.
According to a statement made by Teresa Weipert, general manager for the federal services segment of Maximus, the contract will help them apply their in-depth understanding of the borrower’s needs and customer services to help FSA serve millions of student borrowers successfully.
Also, it seems that FSA trusts Maximus more than Navient. Navient had a shady history when it came to servicing federal student loans.
For example, Nine borrowers filed a class-action lawsuit in December 2020, alleging that Navient improperly misallocated payments to extend the lives of potentially millions of federal student loans.
A federal judge in New Jersey ruled in June 2021 that the borrowers could proceed with their claim. However, the FSA appears to be less concerned now that Maximus has taken over Navient’s federal student loan account management.
Why Navient Moved Away From The Contract
Navient has been under scrutiny ever since the Consumer Financial Protection Bureau (CFPB) sued them in 2017. CFPB claims that Navient has made it difficult for student borrowers to pay back their debts in the lawsuit. The case is still ongoing.
Also, the U.S. Education Department announced in 2020 that they would change the loan servicing to update the federal student loan system. The ED extended its partnership with five of the ten current loan servicers as part of the Next Gen Initiative.
However, the new partnership would be under stricter government regulations. Unfortunately, Navient, together with Granite State and FedLoan, decided to terminate their inclusion in federal student loan servicing when 2021 ended.
What Does Navient’s Departure Mean For You
Your New Loan Servicer Is Maximus or Aidvantage
You should have received an email or mail by now from Aidvantage, Navient, and the Department of Education. If you have not yet received notification, sign in to your current Navient account and double-check that your contact information is correct.
You should be able to log into your new account even if your address is outdated.
Your Aidvantage Credentials Is The Same As Your Navient Account
If you check your Navient account, you’ll see a $0 balance, which indicates that Aidvantage has purchased your debts. Visit aidvantage.com and enter your Navient sign-in information to access your new account.
The procedure is almost the same as Navient. After entering your username and password, you’ll be asked to verify your identity by entering your account number or Social Security number, including your date of birth.
The Aidvantage account home page looks and feels like Navient’s home page.
Select “forgot password” or “forgot user ID” and confirm a personal identification question to have a new one emailed to you if you can’t remember your login credentials.
If you can’t sign in for some reason, call Aidvantage at 800-722-1300 for help.
Your Repayment Terms Should Not Change
Whatever repayment terms you had with Navient, such as deferment, income-driven repayment plans, autopay, etc., should be the same with Aidvantage.
Of course, you may need to recheck your payment details since federal student loans have been halted for more than 20 months, especially with the end of forbearance.
Also, suppose you’ve changed your job since you last reviewed your loan repayment options. In that case, it may be ideal for applying for income-driven repayment options or other repayment alternatives via Aidvantage. That way, you can be prepared when repayment starts in May 2022.
So, after you sign into Aidvantage, you should see that your preferred autopay selection and payment method, including your payment history and loan records paid in full, have all been transferred.
You May Experience Delays During The Transition
It’s advisable to review your account to double-check your transferred student loan amounts and contact information before repayment starts again in May 2022.
You should contact Aidvantage if you discover any problems. You can get their support service, CORA (Customer Online Resource Assistant), or call 800-722-1300 directly.
Your account information should be close by when you make the call. Also, you can find contact numbers for your particular loan type by checking the contact page.
Keep in mind that the transition might take time, thus slowing things down. That also means that customer support response might delay as account information is being transferred., especially if your account is forbearance.
Get Ready For The Repayment
Now is the time if you haven’t been making payments on your loans throughout the forbearance period. Check your payment method, know your minimum monthly payment, and look into repayment options if you need more help.
If you want to look into further forbearance or deferment or alternatives, check your account online and look under “repayment alternatives.”
The Difference Between Your Loans Being Sold And Transferred
With this upcoming service change, your student loans will not be sold. Instead, the Department of Education’s contract with your federal loan servicer may expire.
Through a servicing contract, the Department contracts a company (in this case, its Maximus federal services). It assigns them the responsibility of managing your federal student loans billing and other services on its behalf.
There is an unavoidable inconvenience when your student loan servicer switches. You must register a new user and password for the new company’s online portal.
You’ll need to make changes to your billing details. For example, your monthly due date may change. Basically, everything becomes new and different.
Due to transition problems or transition delays, it may result in decreased income-driven repayment enrollment success rates. This usually corresponds to a higher rate of default.
It’s difficult to process a change of this magnitude in the middle of a pandemic.
What To Do After You Receive A Welcome Letter From Maximus Federal Services
Student loans can cause a great deal of stress. Receiving a welcome letter from a new servicer adds to the anxiety. Here’s how to make the shift go smoothly:
- Start sending payments to your new loan servicer. If you make your loan payments through a bank or bill-pay service, notify the bank or bill-pay provider of the new servicer’s contact information.
- Follow the instructions for setting up an online account with the new servicer so you can connect with them and keep track of your loan account.
Refinance Your Loans To Avoid A Service Switch
Suppose you don’t want to deal with the servicer change, and there’s no advantage in keeping your loans federal (i.e., there’s no forgiveness option, and you don’t need the flexibility of IDR plans). In that case, refinancing may be an excellent option to make your situation easy.
Of course, if taxable or Public Service Loan Forgiveness is a better long-term strategy, don’t consider this alternative.
Instead of paying thousands of dollars a month to a capable student loan servicer, it’d be best to have a bad servicer and pay 10% of your salary on a debt that’s far higher than your income.
The FSA and student loan servicers haven’t announced how Navient will transfer all information to Maximus federal services. The only thing they’ve said is that it’ll be a successful transition. However, you don’t need to worry or panic. Until then, review your information before the repayment begins again.