The amount of student loan debt Americans have been taking on has steadily risen over time. To make matters worse, the latest data from the NASFAA shows that nearly 10% of student loans taken out in 2017 are now in default.
Instead of trying to collect on those loans directly, the federal government contracts those responsibilities out to private companies. Maximus Federal Services is one the companies that the Department of Education has relied up to handle these collections duties.
But Maximus may soon have a larger part to play in the servicing of federal student loans. As part of its "Next Gen" student loan initiative, the Department of Education announced that Maximum was one of five companies awarded new contracts to service federal students loans in the future.
With these potential changes on the horizon, let's take a closer look at who Maximus Federal Services is and what they do.
Who Is Maximus Federal Services?
Maximus Federal Services is a for-profit, private company with headquarters in Reston, VA and Falls Church, VA. It was formed in 1975. The company provides operational services for government health and human services programs in the United States, United Kingdom, Canada, Australia and Saudi Arabia.
The subsidiary of Maximus that handles federal student loans is called Maximus Federal Services Inc. Maximus got involved with the Department of Education (DE) in 2013 when it was awarded a contract to help administer the Defaulted Student Loan Debt Program.
On June 24, 2020, the DE’s Office of Federal Student Aid awarded five new contracts and one of those went to Maximus Federal Services (MFS).
What Do They Offer?
Currently, MFS focuses its student loan-related activities on collecting payments for loans in default. They are one of the federal government’s student loan servicers for defaulted federal student loans. Like F.H. Cann, MFS is not a company you want calling you. If you are getting calls from MFS, it means your student loan is in default.
The five contracts awarded by the DE are part of its Next Gen platform, which is supposed to consolidate loan servicers onto one platform. The end result is that it will be easier for borrowers to get information about their loans, even if they do not know who their loan servicer is. By dialing a single 800 number, borrowers will be routed to the right loan servicer.
“The vision of federal student loan borrowers being able to engage with one interface rather than toggling between multiple servicers is sorely needed and will be well received by both current and future borrowers,” says Greg McBride, CFA, Bankrate chief financial analyst.
But in reality, two of the five contracts were basically awarded to loan collection agencies. And despite its recent contract, there's a chance that Maximus may continue to focus primarily on defaulted accounts even after the DE moves to the Next Gen platform.
What To Do If You're Contacted By Maximus
For now, Maximum continues to function solely as a collector on student loan accounts that are in default. So if you're contacted by Maximus, request verification of the loan to ensure they have the right person and that the debt is truly in default. You have a right to make this request and Maximus must honor it.
Student loans are some of the worst loans to have in default. First, try to arrange voluntary payments with the loan servicer. There are options to help you with this, such as the Rehabilitation Program and an Income-Driven Repayment (IDR) program.
Even if Maximus doesn’t contact you, if you know your loan is about to go into default, contact Maximus to set up some voluntary payment arrangement. The last thing you want is your student loans going into default.
Student loan default means losing the ability to get federal financial aid, negative impacts to your credit score, difficulty trying to get loans or new credit, and potential wage garnishment. In other words, it can really wreak havoc on your financial life.
Will Your Federal Loans Be Moved To Maximus?
It's unclear if Maximus will assume the servicing duties for current student loan accounts in the DE's Next Gen student loan environment. As previously mentioned, it may simply continue to work with defaulted borrowers.
The Education Department says that if your loans are serviced by a company that's going away, the switch will happen sometime in 2021 or before March 2022. And if your account is moved to a new servicer, it says that you'll be given well-advance notice and instructions on how to set up payments.
How To Contact Maximus Customer Service
Maximus Federal Services doesn't publicly disclose its contact information on its website. I'm sure this will change when they become an official loan servicer in 2021 or 2022.
However, if you aren't sure which collections agency is servicing your defaulted loan, Federal Student Aid's Default Resolution Group can provide the contact info for your agency. Here's how how to contact the Default Resolution Group:
Phone number: 1-800-621-3115
General mailing address:
U.S. Department of Education
PO Box 5609
Greenville, TX 75403-5609
Email/online contact form: Contact form
Maximus may become a mainstream federal loan servicer down the road. But, for the foreseeable future, you shouldn't be hearing from Maximus Federal Services unless your loan is in default.
To keep that from happening, take proactive steps to stay current with your federal loans like joining an Income-Driven Repayment (IDR) plan or applying for federal forbearance or deferment.
If your loan is already in default, it's not too late to get thing back on track. Check out our guide to student loan rehabilitation to learn all your options for regaining control of your student debt.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.