{"id":36269,"date":"2018-11-13T19:55:48","date_gmt":"2018-11-14T00:55:48","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/help-you-help-you-navients-new-reliance-on-open-innovation\/"},"modified":"2018-11-13T19:55:48","modified_gmt":"2018-11-14T00:55:48","slug":"help-you-help-you-navients-new-reliance-on-open-innovation","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/help-you-help-you-navients-new-reliance-on-open-innovation\/","title":{"rendered":"Help You Help You: Navient\u2019s New Reliance on Open Innovation"},"content":{"rendered":"

\"\"<\/a><\/p>\n

Background<\/strong><\/p>\n

$1.41 trillion[1].<\/p>\n

Sadly, that\u2019s not my retirement account balance; it\u2019s the amount that over 44 million American borrowers owe in student loans. More crippling than the number, which puts student loan debt at the second highest consumer debt category, is the expectation that 40 percent of borrowers will likely default on their loans by 2023 [2].<\/p>\n

Default can be detrimental for borrowers, with many experiencing a drop in their credit scores requiring them to pay significantly higher interest rates on mortgage loans, credit cards, and auto loans [3]. And while many advocates point to the federal government for solutions [4], a less obvious partner could be student loan servicers who not only have incentives to ensure repayment but also have direct interaction with borrowers.<\/p>\n

Navient<\/strong><\/p>\n

Navient is the country\u2019s largest loan servicer, servicing about $300 billion in federal and private student loans for about 12 million borrowers [5]. Servicers are companies that collect payments, respond to customer inquiries, and perform other tasks. Servicers also:
\n\u2022 Disburse money from the loans
\n\u2022 Respond to borrower inquiries
\n\u2022 Ensure the administration of loans complies with federal regulations and other legal requirements [6]<\/p>\n

As described in their annual report, Navient\u2019s goal is to help borrowers into the right loan repayment plans. They do so by \u201cdrawing from a variety of inputs including customer surveys, analysis of customer inquiries and complaint data\u2026and regularly use customer and employee research panels to gather real-time feedback.\u201d [7]<\/p>\n

Navient and Open Innovation<\/strong><\/p>\n

In an effort to better meet the needs of borrowers and better address the student loan crisis, Navient recently launched an open innovation initiative aimed at leveraging borrowers to improve loan servicing called Navient Labs. Navient Labs is a digital platform where the company tests ideas on how to best service loans. Those ideas come from a variety of sources including customers who are encouraged to submit feedback and ideas directly to the website. Navient Chief Executive Officer Jack Remondi explained that every aspect of the student loan borrowing and repayment process needed innovation improvements. [8]<\/p>\n

In addition to leveraging feedback from existing customers, consumer advocates and policy makers are also encouraged to provide ideas and \u201chelp [Navient] shape what the future of student loan management looks like.\u201d [9]<\/p>\n

Other Recommendations<\/strong><\/p>\n

Navient Labs is a good move in the right direction. Asking current customers for their feedback and ideas on the loan servicing process can help improve loan repayment rates which in turn will decrease default rates. However, there are more actions that Navient and other student loan servicers can take to address the student loan debt crisis.<\/p>\n

Short-Term<\/strong>
\n1. Continue to offer financial planning tools: Student loans are just one aspect of a person\u2019s financial obligations. By providing customers with financial planning and education, they can be better equipped to tackle student loan payments as well as other debt obligations.
\n2. Keep sourcing innovative ideas: Navient Labs is just one way to source innovative solutions to loan servicing. Equally important is sourcing ideas from other student loan servicers in order to understand and implement best practices of the field.<\/p>\n

Long-Term<\/strong>
\n1. Partner with FinTech apps:<\/strong> There are many financial technology (FinTech) applications that are dedicated to helping borrowers repay their student loans. Navient and other student loan servicers should look to partner with these new technologies so that they can better help their customers to financial freedom.
\n2. Streamline student loan repayment options:<\/strong> Although many different repayment options can be helpful for different borrowers, Navient and other student loan servicers should focus on those repayment plans that are most helpful to customers.<\/p>\n

Open Questions<\/strong>
\nA few open questions that I have as Navient continues to implement the Navient Labs initiative are:
\n1. How does this organization measure the effectiveness of the proposed solutions?
\n2. How can Navient ensure that other servicers are adopting the solutions that customers shared in order to improve the student loan servicing industry as a whole?<\/p>\n

(Word count: 791)<\/p>\n

 <\/p>\n

[1] Federal Reserve Bank of New York (2018). Quarterly report on household debt and credit<\/a>. Center for Macroeconomic Data.<\/p>\n

[2] Calyton, J.S. (2018). The looming student loan default crisis is worse than we thought<\/a>. Economic Studies at Brookings. Evidence Speaks Reports, 2(34).<\/p>\n

[3] McFadden, K. (2018). Raising a \u2018fair\u2019 credit score to \u2018very good\u2019 could save over $45,000. Lending Tree. https:\/\/www.lendingtree.com\/finance\/raising-a-fair-credit-score-to-very-good-could-save-over-45000\/<\/p>\n

[4] <\/sup>Perna, L. W., Kvaal, J., Ruiz, R. (2017). Understanding student debt: implications for federal policy and future research. ANNALS of the American Academy of Political and Social Science, 671(1), 270-286.<\/p>\n

[5] Navient Corporation (2018). Form 10-K https:\/\/navient.com\/assets\/about\/investors\/shareholder\/annual-reports\/NAVI_2017_Form_10-K_D13_2.26.18_FINAL.PDF<\/a><\/p>\n

[6] Consumer Financial Protection Bureau (2017). What is a student loan servicer? https:\/\/www.consumerfinance.gov\/ask-cfpb\/what-is-student-loan-servicer-en-583\/<\/p>\n

[7] Navient Corporation (2018). Form 10-K https:\/\/navient.com\/assets\/about\/investors\/shareholder\/annual-reports\/NAVI_2017_Form_10-K_D13_2.26.18_FINAL.PDF<\/a><\/p>\n

[8] Rombach, A. (2018). Focused lab to improve the student loan system. Lendedu https:\/\/lendedu.com\/news\/navient-launches-digital-focused-lab-to-improve-the-student-loan-system\/<\/em><\/p>\n

[9] Remondi, J. Note from Jack Remondi. https:\/\/navlabs30.navient.com\/about.html#a-2<\/p>\n","protected":false},"excerpt":{"rendered":"

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