The CEO of a major student-loan company says Biden's loan forgiveness plan has 'created all types of confusion' for borrowers
- Jack Remondi, the CEO of Navient, said Biden's student-loan forgiveness has created "confusion."
- He said borrowers with FFEL loans still need additional guidance on steps to get relief.
- The Education Department advises people with FFEL loans to consolidate into direct loans to qualify.
Weeks after President Joe Biden announced broad student-loan forgiveness, the companies that service those loans are still grappling with how to implement the relief.
At the end of August, Biden said he would cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year. His Education Department said the relief will be automatic for some, while the majority will have to apply for it in early October. Borrowers and student-loan companies are still struggling to understand the mechanics of actually qualifying for, and getting, that relief.
During Barclay's Global Financial Services Conference last week, Jack Remondi, the CEO of Navient, expressed concerns with the logistics of Biden's debt relief and the lack of clarity companies have at this point.
"Probably the most challenging thing for us right now is what we don't know," Remondi said. "There's more we don't know about the plan and the program than we do know about what's going to happen. It's created all types of confusion. Call volume, for example, spiked almost eight times normal level after the announcement as customers wanted to know information, and we of course had to respond, 'We don't know.'"
Navient owns some loans within the Federal Family Education Loan, or FFEL, program, which are privately held loans that would not automatically qualify for Biden's federal debt relief. So far, the Education Department has advised FFEL borrowers to consolidate their loans into federal direct loans to make them eligible for loan forgiveness, but said it is "assessing" whether to make those loans eligible for relief without any additional action.
Remondi said he hopes that ends up being the case, because requiring all those borrowers to consolidate would be "a pretty significant undertaking."
"Probably the most important thing that we're looking for, and one that we would certainly recommend if this program goes forward, is to allow borrowers to receive the benefit of loan forgiveness that they are eligible for where their loans are held today so that we don't require people to consolidate and go through unnecessary steps that they wouldn't otherwise have to do," Remondi said.
Insider previously spoke to a worker at a small student-loan company that services FFEL loans, and she expressed the same sentiment as Remondi — that the Education Department's lack of guidance is causing confusion to spiral.
"I know in the past when the department's gotten behind on consolidation forms, it would take months to get them through, and that's what I'm really concerned about," she said. "Are they going to accept these applications for forgiveness if the consolidation doesn't happen before December 31? Can they put in the request ahead of time? Are they going to take anybody who had the consolidation application in beforehand?"
Even leading up to Biden's announcement, companies warned the administration that errors could arise during the implementation process by announcing relief with very little notice. But the department maintains it has the ability to carry out this loan forgiveness effectively, and that once the application forms becomes live borrowers should try to apply as soon as possible to get relief before payments resume next year.