SumZero: So Navient is actually incentivized to put student borrowers into delinquency?
Taylor Mann, Pine Capital Partners: That’s the one question that really cuts through and clarifies where the heart of this trade lies: the moral hazard. Prior to the contract renewal, the majority of Navient’s bottom-line stemmed through default collection – not debt servicing. Basically, when a borrower goes into delinquency, Navient actually gets paid a percentage of every dollar that it collects from the borrower instead of an extremely small fixed-fee for collecting a regular repayment.
https://sumzero.com/headlines/financials_and_insurance/NAVI/282-slaying-the-head-of-the-snake-in-the-12t-student-loan-crisis