This company never serviced student loans in -2-

Borrowers also alleged in a different lawsuit filed in federal court in Pennsylvania that the company did not follow the Department of Education's directions to stop collections on defaulted student loans that the agency was reviewing for potential discharges.

The company denied the lawsuit's claims and Rivera wrote in an email to MarketWatch that "Maximus ultimately settled this matter solely for the purpose of avoiding the burden of continuing with these proceedings." In court documents, the company said that as a federal-government contractor it had immunity from litigation, an argument that frustrated advocates and lawmakers, like Democratic Senator Elizabeth Warren, who argued Maximus was trying to evade its responsibilities to borrowers.

Bruce Caswell, Maximus's chief executive officer, emphasized the Office of Federal Student Aid's confidence in the company to service student-loan borrowers in response to a 2021 letter from lawmakers that raised concerns about the company's increased role in the student-loan program, given its history working with defaulted borrowers.

"In partnership with FSA, we have met all their requirements and continue to implement technical improvements to the system at their direction," Caswell wrote of the company's work managing defaulted student loans on behalf of the government.

"Our goal is to provide high-quality service across every government contract we hold," he added. "Maximus has a close partnership with FSA that emphasizes transparency and accountability to help meet the agency's mission and, most importantly, the needs of borrowers."

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Maximus's student-loan work is just one part of the government contractor's operations. David Mastran, who served in the Air Force and later worked for the government as a civilian, launched Maximus in 1975. The idea was to apply "an entrepreneurial, private sector approach," to large scale government projects," the company wrote in one of its early securities filing.

Maximus launched an initial public offering and went public in 1997 on the heels of welfare reform, the Clinton-era initiative that created more requirements for families accessing government assistance. The changes had the potential to "generate significant business opportunities," for companies like Maximus, securities filings said.

Based in Northern Virginia, the company is a creature of Washington. Maximus earns money through its work with the federal government, including operating call centers for people seeking information about Medicare and the Affordable Care Act, and through contracts with states helping to administer social services. In total, Maximus generated nearly $162 million in profits on $4.9 billion in revenue in its fiscal year ended September 30, 2023.

For years, Daniel Hatcher, a professor at University of Baltimore's law school, has been studying the government's increasing reliance on companies outside of government to administer benefits programs that primarily serve vulnerable populations.

"Maximus is a character in this story a lot," Hatcher said, noting that the company has contracts in almost every state and "countless" contracts with the federal government.

Whether individuals have access to certain government benefits is supposed to be based on the government deciding if they should be eligible, Hatcher said. But when private actors are used to administer benefits it introduces a profit motive into the equation, he said.

In the case of delivering government social services, increased complications for beneficiaries can mean an increase in the volume of work, Hatcher added.

Federal student loan servicers are generally paid per account with the amount varying depending on a borrower's status. In addition, servicers may get paid for performing specific tasks. In the student-loan context, contractors may be more concerned with "efficiency and revenue" than finding the right program that is best for a borrower, Hatcher said.

"There can be examples where a contractor, if they have individuals who are skilled and understand the program, can do work and can help somebody," he said. "A lot of that comes down to the individuals working with individuals."

In an email, Rivera emphasized that Maximus doesn't earn commissions from its student-loan work and that it operates within the Department of Education's regulatory framework. "We are charged with assisting Federal student aid with assisting borrowers with the management of their student loans, at the direction of Federal Student Aid," she wrote.

Over the past few years, labor activists have targeted Maximus, saying the way it treats its workers has consequences both for the employees and the people the company serves. They've said call center workers are subject to low pay and poor working conditions. Maximus call-center workers have gone on strike six times over the past year and a half, including in November.

Daniel Bass, a strategist with the Communications Workers of America, a union working with Maximus employees on labor issues, described the actions as "the largest strike of non-union workers in the South in recent history, if not decades." A unit of the CWA represents workers at Dow Jones, a News Corp subsidiary that owns MarketWatch.

Employees at Maximus federal call centers have been working for years with the help of CWA to demand better working conditions and organize a union, Bass added. They've accused the company of illegally trying to stymie their efforts.

In a recent call with investors, Caswell, the Maximus CEO, highlighted that three-quarters of the company's employees who participated in an independently administered survey said they would recommend Maximus as a "great place to work."

Regarding concerns of labor activists about working conditions at the Maximus, more broadly, Maximus spokesperson Rivera wrote, "there has been a significant amount of erroneous information being distributed, misleading our employees, customers, as well as national and local leaders." She noted that over the past five years the company has increased compensation, reduced out of pocket health care costs and "improved the work environment."

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Logan Whitney turned to Aidvantage's online chat function to try to sort out why he wasn't enrolled in the student-loan-payment plan he applied for and why he'd received multiple messages indicating his loan terms had changed when in fact they hadn'.

In August, Caswell touted the company's work on its online chat capabilities as a way to "to support greater opportunities for borrowers to self-service, thus creating reductions in call volumes and staffing demands."

"The restart of tens of millions of borrower student-loan payments marks an unprecedented event, one that our teams are preparing to deliver on in a thoughtful and well-organized manner," Caswell said.

But Whitney has found it challenging to reach someone even in an online chat. "It's so bogged down with people trying to use it that you just can't get a hold of anybody," Whitney, who works as an administrator in a public school district, said of the chatbot. For a while, he found a workaround where he would just keep hitting enter, the chatbot would refresh and eventually he'd get someone. "But they've figured that out and it stopped doing that. I know it was cheating and probably sucked on their end."

Since applying for the Biden administration's new payment plan, SAVE, in mid-September, Whitney also called Aidvantage multiple times to ask why he hadn't been moved to the plan. Whitney said he received bills for a roughly $400-monthly payment, but was told by company representatives and the government's website that under SAVE he qualifies for a $176-monthly payment.

Whitney, 36, estimates every time he's called he's waited on hold somewhere between 50 minutes and an hour and a half. He feels lucky that he has a desk job and he can just let the phone sit on hold. Whitney used to be a teacher and if he was still in the classroom he'd have to get up to call before school because the call center, which is on east-coast time, is closed when he gets off work in New Mexico.

"The whole thing is confusing and hard to get a hold of people, hard to get help," he said.

On November 16, Whitney received notice from Aidvantage that he was approved for a $176 monthly payment on SAVE. Crovo, the postdoctoral researcher at Auburn, was approved for SAVE on November 15. Aidvantage acknowledged receiving an inquiry about these cases on November 15.

For Reid Kelley, spending several weeks trying to get his student-loan payments sorted out made him, for a period, question whether the Biden administration's promise to help borrowers would come to fruition.

Kelley, 36, was "really excited" to hear about SAVE when officials announced it because under the new program he qualifies for a monthly payment that's "actually manageable and wouldn't cripple me financially," he said. He earns about $40,000 a year working as a special education teacher, so the roughly $60-monthly payment was a welcome reprieve.

But in early November, Kelley said Aidvantage was quoting him a $650-monthly payment due in December, despite that he applied for SAVE in August and received confirmation that Aidvantage had received it in early September. In the months since, he tried to get in touch with Aidvantage at least once a week either over the phone or through its chat function.

"A lot of times I couldn't get a hold of anybody," Kelley said in early November. "They weren't even putting me on hold, they were just saying 'the lines are busy call back later.'"

"It's very, very frustrating," he added.

Aidvantage acknowledged receiving an inquiry about his case on November 15.

Kelley said he received an email on November 16 from Aidvantage saying he was approved for the roughly $60 monthly payment under SAVE.

-Jillian Berman

(MORE TO FOLLOW) Dow Jones Newswires

12-20-23 1130ET

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