Pheaa Nets Program: Fill & Download for Free

That’s not how it works. The Federal Government owns the debt. Navient is a contracted servicer. The government can assign out the task of servicing your loan (as do banks with all types of debt) and doesn’t need your express consent.There is a relatively short list of authorized federal student loan servicers; some of the more well-known ones include Navient, NelNet, MOHELA, Great Lakes Educational Loan Services, FedLoan Servicing (PHEAA).The Trump administration has floated the idea of selling the student loan portfolio to private investors. However, that hasn’t happened yet. The government owns most student loan debt. The servicers are simply contracted private companies that service the loan (take the phone calls, process payments, etc.).It is a substantial undertaking to service student loans. For example, the Operating Expenses for PHEAA are 560,000,000 per year. They service about $400 billion worth of student loan debt. Their operating net income is only $21,000,000.The only loans that are privately owned are (1) private student loans (which have no government connection) and (2) legacy FFEL loans. FFEL was the old student loan program where banks would fund the loans, but the government would guarantee the loan. Of the $1.6 trillion of outstanding student loan debt, the government owns about $1.1. trillion of it.

It is not what you think.First, there are 3 flavors of student loans. (1) Federal direct loans. In 2010, the federal government became the direct lender, banks are no longer in the picture. If you get a non-private student loan today, the money comes directly from the government. The government holds about 1.1 trillion of the outstanding student loan debt. (2) Private student loans. These are loans made by private lenders with no government involvement. This represents about 400–500 billion. (3) Legacy FFEL loans. These were student loans made prior to 2010 under the FFEL program. These loans were originated by banks, but guaranteed by the government. Best guess is that there is still about 200 billion floating around.Since 1965, student loans have always had an artificial (or non-market) interest rate. Think about it from the lender's position for a moment. (1) your lending to someone with no, or very limited, credit history, (2) you are lending to someone with no income, (3) the lender won’t receive a payment for at least 4.5 years if not longer, (4) the loan is not secured by any collateral. That is a shitty loan. No lender would make such a loan and certainly not for the 3.5–6% interest that is presently being charged.The reason interest is charged is that the interest (for the most part) on student loans fund the administrative and servicing overhead. There are 44 million borrowers. Someone has to collect the payments, man the phones, etc. We can debate whether that should be outsourced, but either way, there is a cost to servicing student loans and that cost is significant. PHEAA services over 400 billion worth of student loan debt, their Total Operating Expense is $560,308,000. There net operating income (IBITDA) was only $21 million. That is a small price on 400 billion worth of student loan debt being serviced. That is just one servicer (the largest). It isn’t a bad system, the system is largely self-funding; for a government operation, that is pretty efficient in actuality.