Navient, the student loan servicer that is in a battle with the Consumer Financial Protection Bureau over its loan servicing practices, is acquiring a portfolio of student loans from JPMorgan Chase.
Navient reported last week that it is paying $6.9 billion for JPMorgan Chase’s student loans which include around $3.7 billion in federally backed loans, less than half of which are securitized, and around $3.2 billion in private student loans. The deal came just five days after JPMorgan announced that it was looking to get rid of the student loans. Navient is aiming to complete the purchase in stages throughout the quarter and said that the deal will likely be accretive to earnings in 2017.
The move on the part of JPMorgan to sell its student loans comes at a time when millions of people are defaulting on their student loans or are struggling to pay them back. Naturally, many people are looking for student loan forgiveness or forbearance on their federally backed student debt.
According to recent research by LendEDU, the student loan default rate for federally backed loans stands at 11.8 percent with 60 percent of college graduates owing at least one student loan. The average debt per borrower stands at $28,400 with over 7 million people defaulting on their student loans.
Navient, in theory, is in the best position to help these borrowers because it services thousands upon thousands of loans each year. “We welcome our new customers, and we commit to delivering best-in-class support to ensure a seamless transition,” Navient Chief Executive Officer Jack Remondi said in the statement, reported Bloomberg. “We will provide ongoing assistance to help our new customers continue to successfully manage their education loans.”
While Navient is promising to do right by the new student loan borrowers it will be servicing, not everyone is so convinced. Take the Consumer Financial Protection Bureau (CFPB), currently embroiled in a fight with Navient over its student loan servicing practices. Earlier this year, the CFPB lodged a lawsuit against Navient, contending that it provided borrowers with faulty information about loan payments, processed payments incorrectly, and failed to act accordingly when borrowers complained. The student loan servicer was also charged with steering borrowers into costlier programs.
Navient hasn’t been sitting quietly by when it comes to the charges. It has fired back, most recently filing a motion to dismiss the CFPB’s lawsuit arguing it should be tossed out because the CFPB suit is vague and sets its basis in undefined requirements that aren’t laws and regulations on the books. What’s more, Navient says that it hasn’t run afoul of laws and regulations set forth by the Department of Education under the Higher Education Act. Based on the deal with JPMorgan, at least the bank seems to believe the student loan servicer or simply doesn’t care.
Author: Jeff Gitlen
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