Major student loan firm has ‘growing list of scandals’: report
- The Student Loan Protection Center said student loan company Maximus had a history of abuse.
- Low-income borrowers allege Maximus engaged in “unfair” debt collection practices.
- A spokesperson for Maximus said it was not a lender and was merely backend IT support for federal loans.
The world’s largest student loan company may not be acting in the best interests of borrowers, according to a new report.
The Student Borrower Protection Center and the Communications Workers of America released a report on Monday that said student loan company Maximus, which handles federal loans under the name Aidvantage, has been blamed for “a growing list of scandals and of abuse”. Maximus recently took over 5.6 million federal borrower accounts from Navient, which has also been accused of deceptive behavior.
Specifically, the report highlighted lawsuits filed by low-income borrowers who alleged that Maximus had engaged in “unfair” debt collection practices. Some also said Maximus caused an illegal garnishment of their wages when they stopped paying their bills after being defrauded by the for-profit school they attended.
“When student loan companies cut corners and circumvent the law to increase their profits, the most vulnerable people in debt are always being forced to pay the price,” said Mike Pierce, executive director of the Student Borrower Protection Center, in a press release. “Our investigation offers an early warning to regulators and those in debt: Maximus and Aidvantage are now running the same failing service manual that has left millions of Navient borrowers financially bruised and broken. This newly created student loan giant must change course. before it’s too late.”
A spokesperson for Maximus told Insider the report was inaccurate and misrepresented the work Maximus did for federal student aid, adding that the company’s contract with the government was simply to administer loans and track instructions from the Ministry of Education on the management of payment defaults.
The spokesperson pointed out that Maximus is only responsible for back-end IT support, and questions or complaints about a borrower’s account are referred to the lender, which in this case is the federal government. Additionally, in response to the nearly 200 complaints lodged by borrowers against the company, the spokesperson said 178 of them had been successfully addressed.
A “newly created student loan giant”
Last year, student loan company Navient announced it would close its federal services, and the Department of Education later announced that Aidvantage would take over Navient’s accounts. As student loan payments have been suspended for two years as part of the fight against the pandemic, three student loan companies have announced that they will end their federal services during the break, resulting in the transfer of 16 million borrowers to new companies.
These transfers worry some lawmakers and advocates, given the administrative burden of successfully and accurately transferring millions of borrowers. While Navient had a controversial history with accusations of deceptive borrowers, Monday’s report suggested those borrowers might not be better off under Maximus.
The report also highlighted several other lawsuits against Maximus. In 2019, a student victim of fraud accused the company of continuing its debt collection efforts despite being ordered to stop such efforts while the student’s loan forgiveness application was pending, which resulted in the seizure of his tax refunds. Most recently, in January, nine borrowers accused Maximus in a lawsuit of misleading them about their ability to get out of defaults.
Maximus said “it’s imperative” to get a good repayment transition
In November, Massachusetts Senator Elizabeth Warren wrote a letter to Maximus expressing concerns about how the 5.6 million borrowers she would serve would be treated. Following Warren’s letter, the company’s spokesperson told Insider, “This is a defining moment for student borrowers, and we couldn’t agree with Senator Warren more – it’s imperative that we let’s do it right.”
The Consumer Financial Protection Bureau, along with federal student aid chief Richard Cordray, have spoken out about potential abuses by student loan companies and the need to hold them accountable. Cordray told the Washington Post he was reviewing the Student Borrower Protection Center report and would work to respond to it.
“All borrowers should be able to count on timely and accurate information about their student loans,” Cordray said. “That’s why the FSA renewed its partnerships with federal and state regulators, removed barriers to state oversight by clarifying federal preemption rules, and negotiated new liability terms in our recent contract extensions. .”
Cordray said last year that student loan servicers would be held to higher standards and that if they failed to meet those standards, they would “face consequences.” The CFPB has also launched a series of investigations into accusations of administrative officials misleading borrowers and pledged to strengthen oversight.