Student Loans Explained
We took a look at Navient and analyzed how it compares to other federal student loan servicers.
MADISON MILLER – JULY 24, 2018
Student loan servicers have been a pain point for many students and parents throughout the U.S. Navient, one of the most well-known servicers, is currently involved in six lawsuits—most recently cases filed by Mississippi and California. The suit contends that Navient processed payments incorrectly, didn’t allow borrowers to lower payments and improperly directed borrowers into forbearance instead of income-driven repayment plans. Given the big role servicers play in the lives of student loan borrowers, we decided to take a deeper dive into the data behind Navient and other such companies.
• AES-PHEAA has the highest proportion of federal student loan borrowers in forbearance with a total of $45.6 billion outstanding for 890,000 borrowers as of March 2018.
• Navient has the lowest portion of student borrowers in income-based repayment plans compared to the other three big loan servicers.
• Navient has more than twice the amount of CFPB complaints that AES-PHEAA has, although AES-PHEAA services 1.6 million more borrowers.
• The main CFPB complaints filed about loan servicers involve borrowers receiving bad information about their loans or having trouble with how their payments are handled.
Student loan servicers are arguably the most important point of contact for a borrower. These are typically third-party companies that manage the entire repayment phase of a student loan, including helping borrowers choose repayment options. They are different from a collection agency because they are supposed to work with the borrower to manage payments while also taking into account the financial well-being of the borrower. However, consumer complaints about these servicers are growing, with the Consumer Financial Protection Bureau (CFPB) receiving more complaints about loan servicers than payday loans.
A common complaint is that loan servicers fail to provide borrowers with crucial information about their loans, including whether they qualify for certain repayment plans that could help them avoid forbearance or default. Borrowers only declare forbearance when they are unable to repay their loans due to financial circumstances. Repayment plans, such as income-repayment, can help those that may be struggling to afford standard fixed and gradual plans. With income-repayment plans borrowers instead pay a manageable percentage of their income and any remaining loan balance is forgiven after 20-25 years.
Which Federal Loan Servicers Have the Most Borrowers in Forbearance?
Navient has been accused of pushing borrowers to declare forbearance rather than discussing more affordable plans, like income-driven repayment options. However, we found that AES-PHEAA has the highest percentage of borrowers in forbearance, with Navient following closely behind. Additionally, the proportion of borrowers in forbearance is not too far off from some of the other lenders, as Great Lakes and Nelnet also have a similar percentage of borrowers in forbearance.
Below is a breakdown of the total dollars outstanding and number of recipients in forbearance for each federal loan servicer. AES-PHEAA and Great Lakes have the most recipients and dollars outstanding, but Navient has nearly as many borrowers in forbearance as Great Lakes, not even taking into account the proportion of the total number of borrowers in repayment.
Servicer Dollars Outstanding (billions) Recipients (millions)
AES-PHEAA $45.60 0.89
Great Lakes $26.20 0.7
Navient $28.50 0.63
Nelnet $15.30 0.43
Not-for-profit servicers $3.70 0.17
Which Federal Loan Servicers Have the Most Borrowers in Income-Driven Repayment Plans?
Out of the four largest federal servicers, Navient—the servicer accused of not disclosing income-driven repayment plans to struggling borrowers—had the lowest percentage of borrowers in this type of plan. And although AES-PHEAA had the most borrowers in forbearance, the company also had 36% of its borrowers in income-driven repayment plans, which beats Navient by 10%. Income-driven repayment plans tend to help struggling borrowers, as they can lower monthly payments. This extends the repayment period and increases the amount of interest paid over time, but it also frees up income that borrowers may need for paying other bills and can help borrowers avoid forbearance.
Federal student loan borrowers have a few different options when choosing to repay their student loans. They can choose a level, graduated or income-based plan depending on their financial circumstances. The best option depends on your individual situation and how much you can afford to pay every month. However, for borrowers who can’t afford to pay the standard monthly payments, there are four types of income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). Under these plans, you’ll pay based on a percentage of your income for 20 to 25 years. After that point, your loans may be forgiven.
Federal Loan Servicers With the Most CFPB Complaints
We took a look at the CFPB complaints filed for the top federal loan servicers and compared the number of complaints with the total number of recipients. Navient had the most complaints with the CFPB than any other loan servicer, which could account for why the servicer is currently dealing with so many lawsuits. We found that Navient had 544 complaints per 1 million recipients between March 31, 2017, and March 31, 2018, while all other servicers had less than half that number.
Servicer Total complaints Total recipients Complaints per 1 million recipients
Navient 3,599 6,610,000 544
AES-PHEAA 1,575 8,210,000 192
Nelnet 585 6,390,000 92
Great Lakes 310 8,180,000 38
We looked deeper into the complaints each servicer received to compare and understand the specific issues. Most commonly, borrowers received bad information about their loans or had trouble with how their payments were handled.
Issue Navient AES-PHEAA Nelnet Great Lakes
Received bad information about your loan 716 454 152 51
Trouble with how payments are being handled 592 399 98 71
Can’t get other flexible options for repaying your loan 115 57 40 43
Problem lowering your monthly payments 335 66 31 20
Don’t agree with the fees charged 211 79 41 22
Navient received the most CFPB complaints by far out of the top federal loan servicers. Although AES-PHEAA services approximately 1.6 million more borrowers, the company received just a little more than half the complaints that Navient received. Most borrowers complained that Navient gave them bad information about their loans, and many said the servicer failed to inform them about the requirements for Public Service Loan Forgiveness (PSLF), making them ineligible. And other borrowers reported that Navient increased their loan amounts or changed their repayment plans without the borrowers’ knowledge.
AES-PHEAA is the largest loan servicer that the federal government uses to handle federal student loans. It has significantly fewer complaints compared to Navient, considering the number of borrowers the company services. However, the company has its fair share of lawsuits, including one filed by the Massachusetts attorney general over alleged unfair practices. Similar to Navient, the majority of complaints had to do with receiving incomplete information about Public Service Loan Forgiveness (PSLF) and how borrowers’ payments are being handled, with loan payments being applied late or incorrectly.
Nelnet has the least number of borrowers compared to the other three servicers but still managed to have more complaints than Great Lakes. It is important to note that Nelnet acquired Great Lakes in 2017; however, the companies have continued to service their own portfolios and have maintained their separate brands. Nelnet borrowers filed a lawsuit in June, charging that the company canceled borrowers’ income-based repayment plans before the deadline to renew. Many of the CFPB complaints with Nelnet had to do with the company’s failure to acknowledge borrowers’ requests for forbearance and deferment as well as reporting incorrect information about borrowers’ loan status or payment owed.
As mentioned, Great Lakes is now owned by Nelnet but still maintains its separate portfolio and brand. The company had the lowest number of complaints compared to the other loan servicers but has had lawsuits in the past. According to one particular lawsuit, the servicer gave false information regarding the requirements for Public Service Loan Forgiveness. However, the most complaints were about having issues with how payments were handled. The specific complaints seem to vary from borrower to borrower and seem to have been resolved by the lender.
What Can Borrowers Do If They’re Unhappy With a Servicer?
Unfortunately, you can’t choose your loan servicer when you get a federal student loan. This can be problematic, as loan servicers play an essential role in student loan repayment, which can last up to 25 years. If you don’t like the loan servicer that the Department of Education has assigned to you, your only options are to stay with the loan servicer and be on top of your payments or refinance with a private student lender.
According to a CFPB report, student loan complaints increased 325%, comparing a three-month period in 2016 and 2017. Out of those complaints, 64% were about dealing with a lender or servicer. Only 36% of those complaints were about federal student loans while the majority were about nonfederal student loans. So, staying with your federal loan servicer may not be a bad option, considering the difference in consumer complaints. However, if dealing with your servicer is unbearable, you do have other options to consider.
Refinancing is the best way to change your student loan servicer, and if you have good credit history, switching may even lower your interest rate and monthly payment. Private refinancing lenders either service their own loans or use a third-party servicer for borrowers. Some top refinancing companies to consider include SoFi, which helps borrowers who are facing financial difficulties find jobs, and Discover, which services its own loans, so you deal directly with the lender if you have any issues or want to change your payments.
Before choosing a refinancing company, evaluate what you want in a servicer. Maybe you want more repayment options, unemployment services or better customer service. Using your top priorities, you can then search through student loan refinancing companies, read reviews and request quotes for lenders that line up with your preferences. But keep this in mind: You may lose some protections that come with federal student loans if you refinance with a private student lender. These may include government-backed forbearance and repayment plans, including Public Service Loan Forgiveness. So, you should consider how refinancing will affect your loan and whether the switch is worth losing those benefits.
Data for the student loan portfolios of each federal loan servicer was gathered from the Federal Student Aid division of the U.S. Department of Education. The figures were calculated using the most recent data from March 2018 about the distribution of borrowers in repayment by loan status and repayment plan. Data on the complaints for each loan servicer was taken from the CFPB.