The U.S. Department of Education is seriously considering granting a potentially billion-dollar, decade-long contract to a former unit of Sallie Mae, the student loan company the Justice Department last month accused of cheating U.S. soldiers.
In a previously unreported move, the department said May 30 that Navient Corp., the nation’s largest student loan company, was one of four finalists for a new contract to run its system for originating and disbursing new federal student loans and grants and keeping track of existing ones. The current contract, held by Accenture LLP, was valued at $880 million as of May 19, according to the Education Department.
If Navient wins the contract, it would have a role in originating new federal loans for borrowers, keeping track of their debts, collecting monthly payments on their loans, and chasing them if they default. In other words, a borrower’s entire interaction with the Education Department — from the moment she takes out a loan to the day she pays it off — could solely be through Navient.
The May 30 announcement, made in federal contracting documents, follows a May 13 settlement between Navient, the Justice Department and the Federal Deposit Insurance Corp., a federal bank regulator. In the settlement, government authorities accused Navient and SLM Corp., or Sallie Mae, of intentionally overcharging troops on their federal student loans and willfully obtaining default judgments against service members over an eight-year period, in violation of the Servicemembers Civil Relief Act. The FDIC alleged the companies illegally told troops they had to be deployed to receive entitled benefits and improperly required them to meet other tests. It’s possible that up to 60,000 troops were harmed, authorities said.
Neither company admitted or denied wrongdoing, though Navient’s chief executive, John Remondi, apologized in a statement for “processing errors.” Navient spun off from Sallie Mae on May 1, taking the company’s loan servicing and collections business. Sallie Mae is now a bank.
Navient’s selection as a finalist for the lucrative loan origination contract follows a series of moves by the Education Department that raise doubts about its commitment to police the company and its other contractors amid mounting evidence suggesting wrongdoing. The selection also highlights Navient’s close relationship with the department, for which it collects payments on loans and chases borrowers who default. Navient also sometimes coordinates with the department when responding to congressional inquiries.
At the time of the May 13 settlement, Education Secretary Arne Duncan vowed to hold Navient accountable, and replied that “every option is on the table” when asked whether the company would keep its other well-paying Education Department contract to interact with borrowers and collect their payments on federal student loans. The company has four servicing contracts valued at a combined $126 million, department records show.
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Story: http://www.huffingtonpost.com/2014/06/09/navient-contract_n_5473814.html