Two student-loan reform groups are calling on Navient, the publicly traded student debt servicer, to halt share buybacks and dividend payouts as part of the national response to the coronavirus pandemic.
Navient, whose stock has lost more than 50 percent of its value this year, should conserve its money to improve its much-criticized dealings with customers and protect its millions of student loan borrowers in the economic downturn, the groups say in a letter to Navient.
The April 17 letter to the Navient board says the company has spent $3.2 billion on stock buybacks since it was spun off from Sallie Mae in 2014 — more than double its capitalization on Wall Street.
Last October, the board approved an additional $1 billion in buybacks. Naviant pays a dividend of 64 cents a share, a 9.07% yield to stockholders. The firm made almost $600 million in profits last year. Wilmington-based Navient’s shares lost 6.94% on Tuesday, closing at $6.57.
“The company has a choice to make,” said Seth Frotman, executive director of the nonprofit Student Borrower Center and the nation’s former federal student loan watchdog. “Will Navient continue to service loans on the cheap so it can keep sending billions to Wall Street? Or, will it invest in helping the millions of borrowers struggling during this pandemic?”
The second group, Americans for Financial Reform Education Fund, is a nonprofit coalition of more than 200 civil rights, community-based, consumer, labor, small business and investor groups, and individual experts, according to its website.
On Monday, Navient issued a statement about responding to the crisis, but declined to comment on the buybacks and dividends proposal. The firm said it had been working hard to respond to questions from borrowers after President Donald Trump announced last month that interest and payments on federally backed student loans would be suspended.
“Navient is fully dedicated to supporting borrowers, without interruption, throughout this challenging time. … We are proud of the work our employees have done these past few weeks to provide continued service to borrowers while over 90% of call center employees transitioned to work from home," company spokesman Paul Hartwick said in an e-mailed statement.
Navient, one of several organizations with contracts with the U.S. Department of Education, services $227.6 billion of debt for 6.2 million borrowers for the federal agency, data show.
Other student loan servicers include the Pennsylvania Higher Education Agency, a state agency many borrowers recognize under its FedLoan brand, and the publicly traded Nelnet Inc. in Nebraska.
In 2017, the Consumer Financial Protection Board sued Navient, claiming that it has failed to properly service the federal loans in its portfolio and cost borrowers millions of dollars by neglecting to offer them options to reduce their loan payments depending on their incomes. Also in 2017, Pennsylvania Attorney General Josh Shapiro sued the company, making similar claims of anti-consumer practices. Both suits are ongoing.
Based on consumer complaint data at the Consumer Financial Protection Bureau on Monday, Navient has improved its customer service since 2017, when borrowers filed 6,614 complaints with the federal agency. Those complaints fell to 3,015 in 2018 and 2,236 in 2019.
On social media, some have praised Navient.
But others have complained.
As part of the economic stimulus response to COVID-19, the federal government has suspended payments on federal student loans through Sept. 30. But the stimulus does not address payments on private student loans, which also are serviced by Navient and other firms.
The reform groups’ letter to Navient’s board stated that in 2019 a “borrower defaulted on a federal student loan every 26 seconds. At the start of 2020, more than 11% of aggregate student loan debt was at least 90 days delinquent or in default."
“And now,” the letter warned, "millions of additional borrowers are teetering on the edge as the fallout from the global coronavirus pandemic unfolds.”