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June 18, 2014

Department of Education Extends Contract for Debt Collector Previously Under Fire

Despite heavy opposition from student, union, and trade groups, the Wall Street Journal is reporting that the U.S. Education Department will extend the contract of Navient Corporation, a student-loan servicer and collection agency that was formerly a division of Sallie Mae, despite allegations it has overcharged borrowers.

Navient’s work for the federal government was worth $106-million last year, and its contract would have expired this month. Sallie Mae, which in April was divided into two companies, Navient and Sallie Mae Bank, agreed last month to pay $97-million to settle claims that it had overcharged members of the armed services. Groups including the AFL-CIO and various student organizations had petitioned Education Secretary Arne Duncan to let Navient’s contract expire.

Navient collects payments on federal loans from about six million borrowers, the third most of the 11 companies that service federal student loans.

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