Jack Remondi, president and CEO of Navient, the nation’s leading
loan management, servicing and asset recovery company, delivered
remarks at the company’s 2016 Annual Meeting of Shareholders.
Excerpts of his remarks on the cost of college and student debt are
as follows:
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.
In fact, if all other major federal servicers performed at our
level, 300,000 fewer borrowers would have defaulted last year.
That’s nearly 20 percent of all federal serviced loans that
defaulted last year.
Students, families and taxpayers—all of whom share in the cost
of the student loan program—deserve an approach based on data and
facts, not political rhetoric.
On advancing policy to improve the federal student loan
program
As a leader in our field, we regularly advance policy ideas and
innovations to improve the federal student loan program. Our top
recommendations are as follows:
- 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.
Connect with @Navient on Facebook, Twitter and LinkedIn.
About NavientAs the nation's leading loan
management, servicing and asset recovery company, Navient
(Nasdaq:NAVI) helps customers navigate the path to financial
success. Servicing more than $300 billion in student loans, the
company supports the educational and economic achievements of more
than 12 million Americans. A growing number of public and private
sector clients rely on Navient for proven solutions to meet their
financial goals. Learn more at navient.com.
Contact:
Media: Nikki Lavoie, 302-283-4057, nikki.lavoie@navient.com
Investors: Joe Fisher, 302-283-4075, joe.fisher@navient.com
Customers: 888-272-5543
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