Just before the holiday weekend I noticed a press release from Navient, the nation’s largest student loan servicing and collection company, publishing excerpts of CEO Jack Remondi’s remarks at their Annual Meeting of Shareholders.
What struck me first was the similarity of his opening comments about the rising cost of education to an article that I wrote and published on Forbes.com back in April 2011. The title was “Entry Level Jobs That Pay $123,000?”
The second thing I found interesting is that Mr. Remondi shared specific, positive stories of borrowers they’ve helped – or tried to help. This rarely happens. Collection agency leaders tell me regularly that there are many consumers who send thank you notes, or who express positive experiences with their firms; yet when I ask them to share those stories, one of the following typically happens: 1) They just never get around to it; 2) They assign it as a project to someone (to redact personally identifiable information), and they just never get around to it; 3) They say they’d rather not share, as some would likely twist it into a way to target their firm, and they’d rather stay out of the spotlight.
I’m not the leader of a collection agency so I can’t fully appreciate these responses. But as the leader of a media company, I think it’s a shame, and a missed opportunity. The stories the industry regularly complains about that appear constantly in the mainstream media are specific, emotional, and effective. The industry regularly responds with brief statements vetted by attorneys. They are general, impersonal, and ineffective. I get it. But it’s a shame.
That’s why these remarks and stories shared by the leader of Navient stood out to me…
On the cost of higher education
Student debt is a hot-button issue this election season. Unfortunately, today’s political environment means much of the discussion has focused on polarizing sound bites, creating an incomplete and inaccurate description of the issues.
College cost is an issue that needs to be discussed and addressed. For seemingly forever, the sticker price of a college education has risen at more than twice the rate of inflation. With family incomes flat or rising much slower, it’s no wonder that Americans are very concerned about their ability to send their sons and daughters to college.
Higher cost, growth in the number of people pursuing higher education, and programs that extend repayment terms have all contributed to the growth in outstanding loan balances. We have also seen a significant increase in borrowing for living expenses and from non-traditional students.
Most borrow wisely, others do not. As a result, we see a very wide range of experiences and outcomes. In fact, the best predictor of success or its inverse, default, is not how much one owes, but whether or not the borrower has earned their degree. Borrowers who do not graduate are significantly more likely to default versus those who graduate.
The student debt debate has often turned from the cause—the cost of higher education—to the symptom—the amount of student debt. In the need to find a villain, some have taken to blame servicers. Servicers are, however, the last stop on a borrower’s journey with federal student loans. Servicers don’t determine the price of college, set interest rates, determine how much one can borrow, or evaluate the value of the program of study. Instead, a servicer’s relationship with a borrower begins only after the student has already borrowed and the funds have been spent.
On helping customers on the path to repayment
At Navient, we use our experience and data to create highly effective tools that assist our customers as they navigate the path to repayment. Let me share with you a few stories:
Bria is one of our 1,000-plus customers who successfully pay off their last loan each day of the year. Here is how she paid off her $26,000 in student debt just six years after graduation.
“First, I stopped ignoring my student debt,” she says. “I collected all my documents and synced my loans to a budget app. It was a great feeling to see them decline over time. I moved across the country to give up paying rent and lived with my grandmother for a time. After 13 months, I had paid off a significant chunk of my loans, bought a car and managed to build up savings too.”
Bria continues, “I applied for every promotion I could get and over the next two years I doubled my income, my savings, and my loan payments. Then, I paid off two smaller loans so that the feeling of accomplishment would inspire me to work towards that next ‘Paid in Full’ letter. Then, I paid off the loans with the highest interest rate first and finished up the remaining loans. To celebrate, I took myself on a trip to a new country I’d never been to and I backpacked for a week on my own.”
Let me tell another story about a borrower we’ll call Jennifer. This customer enrolled in a community college but then left school without a degree. Early on, she read a few of our emails that encouraged her to contact us to discuss her payment options, but otherwise did not engage. When she missed her first payment, we reached out several times. When she missed her second payment, we reached out, again several times. In fact, during a 12-month period of missed payments, we attempted to contact her more than 250 times, through email, letters, phone calls and text messages. After a year of zero payments, despite our multiple efforts, we could not reach her to help her.
Nationally, the default rate is on the decline, but when it does occur we find some common themes: no graduation, low balance, and no contact. We’re continually enhancing our contact strategies to reach these at-risk borrowers, helping to reduce default rates.
And finally, I’ll share a story about Kam. She was in and out of the state university a few times. When she missed her first payment, we reached out. When she missed her second payment, we reached out. Finally, at nine months past-due, our outreach paid off. Kam spoke with Navient team member Michelle in our Fishers, Ind., servicing center. Michelle explained how income-driven repayment works and how to apply. Kam is now enrolled in the REPAYE program with a reduced monthly payment of $18.
Helping customers avoid default is the most important work we do. The only borrower we can’t help is the borrower we can’t talk to. Customer contact is key. When we can engage with a federal loan borrower who has missed payments—even multiple months of payments—nine times out of 10, we help the borrower avoid default.
On behalf of Team Navient, I’m proud of our industry leading work in this space.
He then went on to offer these (appropriate, in my opinion) recommendations:
- First, Congress should fund services that help students and families understand the total cost of college—before they select a school and start to borrow. Too many borrowers tell us they wished they had this information before they borrowed. Good information upfront helps students make informed decisions about debt, and would increase the likelihood of graduation.
- Second, policymakers should simplify the number of repayment plans. We can consolidate the myriad plans into the most borrower-friendly options and make it easier to enroll, increasing the likelihood borrowers will engage.
- Third, if they can, borrowers should be encouraged to pay off their loans earlier rather than delay. We provide a suite of free tools to help borrowers better understand how interest works and model how paying a little extra each month can save a lot over time.
- Finally, we need more voices of encouragement to the millions of student loan borrowers who have received financial assistance from the American taxpayer. All borrowers, and especially those facing financial strain, should be encouraged to engage directly with their servicer. As our results demonstrate, contact works. Let’s encourage it.