While global markets did experience a drop overnight following the results of the U.S. presidential election, those same markets rallied by the next day. According to analysts, some industries showed significant improvement after the election. Among the stocks that experienced an increase in value was Navient, a company that services as well as collects on student loan debts.
The subject of student loan debt is one that received much attention during the election. During the current administration, student debt became a significant concern as college costs steadily increased and additional adult students opted to pursue a higher education, often at for-profit colleges. During the Obama administration, steps were taken to address the situation, including investigating for-profit colleges that many critics felt often preyed on students, leaving them with worthless degrees and high student loan debts.
Many critics feel that such steps have not been nearly enough, leaving far too many students continuing to struggle to pay massive amounts of debt from financing the cost of their education. In reality, student loan debt did show a significant increase during the last few years, a trend that has been blamed on states lowering investment in higher education, forcing a larger share of the costs onto students and their families. Regardless of the reason behind the crisis, Americans now hold $1.3 trillion student debt, a challenge the new administration will inherit. While president-elect Donald Trump has stated that the cost of attending college should not be an albatross around the necks of students for the rest of their lives, there are still many questions regarding exactly how he plans to handle the situation.
While campaigning for president, Trump proposed a number of changes that would directly impact the student loan situation, including putting an end to the federal government’s Direct Loan program. Under his plan, the program would be replaced with loans originated by financial institutions and banks. Eligibility for such loans would be based on the future earnings potential of students.
Other proposed changes include replacing all federal loan repayment plans. A new income-based plan would take the place of those plans, with monthly payments to be capped at 12.5 percent of the discretionary income of a borrower. Loan forgiveness of the remaining debt balance would occur after 15 years of payments rather than 20 years under the current system. Trump has also stated that he would consider reducing the size of or even shutting down the Department of Education altogether.
In addition, Trump has stated that he plans to lower college costs by reducing what he refers to as the administrative bloat resulting from compliance paperwork and federal regulations, making it possible to pass savings on to college students and their families.
Questions have also been raised as to whether Trump might have changes in mind for the Consumer Financial Protection Bureau, the federal agency responsible for keeping an eye on predatory student loan companies.
Currently, tens of thousands of student borrowers are requesting relief under a rule that allows federal student loan borrowers who were the victims of fraud at their schools to have their debts forgiven. Earlier this year, the process for filing borrower defense claims was streamlined by the Department of Education. However, some concern remains that work to address defrauded borrowers will not continue under the new administration, leaving thousands of people still facing what has become a crippling amount of debt.
A revamp of the student loan servicing system is currently underway by the Department of Education, with a goal of having the private companies responsible for managing the student loan repayment process to become more responsive to the needs of borrowers. According to critics, services rarely act in the best interests of borrowers.
In light of such concerns and a new incoming presidential administration, changes to the student loan servicing system could soon take place. Clearly, many investors feel this could be the case, as the value of companies like Navient has suddenly begun to skyrocket.
Navient Corporation offers a variety of financial services and products, operating in three areas. Those areas include Federal Family Education Loan Program (FFELP) Loans, Business Services, and Private Education Loans. The company also holds the portfolio of education loans guaranteed or insured under FFELP, along with the portfolio of private education loans. Additionally, Navient offers asset recovery services for receivables and loans on behalf of FFELP loan guarantors and colleges and universities.