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Why You Need to Know About the Navient Lawsuit

Navient Lawsuit

Dealing with student loan debt is difficult enough. But some loan providers work to make it even harder to pay back debts.

A 2015 study found that 7 out of every ten graduating college seniors had student loan debt. They averaged more than $30,000 in debt per borrower.

You may expect high interest rates from private student loan providers. But federal loans with low interest rates have always seemed like a smarter alternative for students. They also offer flexible payment options. Unfortunately for some borrowers, the Navient lawsuit has proved otherwise.

What is a loan servicer?

When a student takes out a federal loan, they are borrowing money from the U.S. government. But the government does not deal directly with the student borrowers.

Instead, a student loan servicing company acts as a go-between.

The servicer collects payments from the student. They also process information like address or name changes. They can also help with extensions on the due date for student loan payments.

A loan servicer also helps students consolidate their loans or develop repayment plans. Their services are free of charge to the student. They also answer questions about loans and repayment for the students.

The Federal government is suing #Navient for illegally failing borrowers at many different steps of the loan process

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Who is Navient?

Navient website

Navient Corporation, based in Wilmington, Delaware is the largest student loan provider in the United States. They offer private student loans and are also a federal student loan servicer. They are one of eight student loan servicers.

Federal loans are supposed to have lower interest rates and flexible payment options, to make it easier for students when they graduate.

Navient used to be a part of Sallie Mae. Sallie Mae, originally known as The Student Loan Marketing Association, was founded in 1973 by the U.S. Congress.

It supported the student loan program created by the Higher Education Act of 1965. The act helps all students gain access to loans.

Sallie Mae student loan forgiveness

Navient Student Loans

Sallie Mae later expanded to offer private student loans. In 2014, Navient split off of Sallie Mae. Navient handles the company's federal loans.

Navient now handles more than 12 million student loan accounts. Those accounts include more than $300 billion in federal and private loans.

Navient student loan forgiveness programs

Navient Student Loan Forgiveness

What is Navient loan forgiveness? There are several options for federal loan forgiveness, cancellation, and discharge if you hold any Navient student loans.

Those include:      (click to expand)

Income-driven loan forgiveness

Public service loan forgiveness (PSLF)

Loan forgiveness for nurses

Teacher loan forgiveness

Student loan discharge

Total and permanent disability (TPD)

What is the Navient Lawsuit?

A lawsuit against Navient was launched by the Consumer Financial Protection Bureau (CFPB) in January of 2017.

The Federal government and the Washington state Attorney General are suing Navient for illegally failing borrowers at many different steps of the loan process.

The lawsuit includes several different claims against the loan provider. The accusations against Navient include:

1. Incorrectly applied loan payments

Sallie Mae Navient

Borrowers may have several loans on their account, spread across multiple federal student loan servicers. These can include a mix of private student loans and federal student loans.

When a borrower makes a student loan payment, it needs to be applied to their loans in a certain way. For example, if a student has two federal loans, they need to pay towards both.

So a $300 monthly payment goes towards both loans.

But Navient incorrectly applied or allocated student loan payments. They also failed to correct their mistakes unless a borrower contacted them. 

2. Steered student borrowers towards paying more than they needed to

sallie mae lawsuit

Federal loans are designed to be more flexible than private loans. This encourages students to attend college without fear of falling into crippling debt.

When students run into problems paying back federal loans, they have the option to apply for repayment plans. These can lower their monthly payments without major increases in interest.

But in the Navient lawsuits, the CFPB alleges that the company failed to help struggling borrowers. Instead of helping them lower their payments, Navient illegally encouraged students to choose forbearance.

Forbearances pause a borrower's payments so that they do not default when they don't pay. But it also comes with a big increase in interest.

Between January 2010 and March 2015, federal student loan servicer Navient added $4 billion in interest charges to student accounts under forbearances. The Navient lawsuit alleges that much of those charges could have been avoided.

3. Failed to warn borrowers of impending deadlines and requirements

Navient sallie mae Hourglass

One of the principal charges in the lawsuit against Navient is a failure to communicate with borrowers. This is one of the main responsibilities of student loan servicers.

Federal loan borrowers have the option of applying for income-driven repayment plans. This means that they pay a rate based on their annual income, rather than standard payment amounts.

This helps recent graduates who may be working lower-paying entry-level positions.

But this repayment option comes with several requirements. Each year, borrowers must submit proof of their income and their family size.

Part of the Navient lawsuit alleges that the emails sent by the company to borrowers on income-driven repayment plans didn't warn them of deadlines to submit these requirements.

When a loan borrower failed to meet these deadlines, they were disenrolled from these payment plans.

Their payments leaped in price, sometimes by thousands of dollars. They also accrued interest from the time they were enrolled in the repayment program.

4. Mislead borrowers who were trying to release co-signers

Navient lawsuit shackle

If a borrower wanted to legally release a co-signer, Navient told them that they needed to make a certain number of consecutive payments.

The borrower's account kept a record of these consecutive payments.

But if a borrower chose to get ahead on their Navient school loans by making payments ahead of the due date or by making multiple payments at once, Navient reset this record.

This prevented those who were getting ahead on payments from releasing their cosigners.

5. Harmed the credit of severely injured veterans and other borrowers

Navient harms veterans credit score

One of the most shocking charges in the Navient lawsuit is the accusation of harming the credit of veterans.

The federal government offers loan forgiveness for several different reasons and situations.
Veterans who are severely injured may apply for loan forgiveness. This is part of the federal Total and Permanent Disability discharge program.

Rather than helping them seek their loan forgiveness or reporting their situation, Navient chose to report injured veteran as defaulting on their Navient school loans.

This could have a potentially devastating result on their credit score. This affects their ability to get other loans, credit cards, and more.

Navient Lawsuit Settlement

Apart from the CFPB lawsuit, there are also two class-action lawsuits that Navient agreed to settle:

It might take a while to receive your Navient settlement check, so keep checking back for more news and updates regarding the lawsuits.

Pennsylvania Lawsuit

On October 5th 2017,  Pennsylvania's Attorney General Josh Shapiro announced that his office is suing Navient Corp., over 'deceptive practices'.

Those include allegedly steering borrowers into costly repayment plans that does not include loan forgiveness, and pushing predatory loans.

Shapiro stated that Navient's loan servicing center in Wilkes-Barre is responsible for most of these practices.

"The scheme costs billions of dollars that's been taken out of the pockets of students."

“Navient repeatedly engaged in misleading practices meant to boost their profits at the expense of Pennsylvania students,”

“They crossed the line in pursuit of profit, and we’re here to change their behavior and help the people who’ve been harmed.”

Attorney General Josh Shapiro

Josh Shapiro

Pennsylvania Attorney General

Navient responded to the Pennsylvania lawsuit stating that “the allegations are completely unfounded.”

Dealing with student loans can be a stressful process. Situations like those that prompted the Navient lawsuit make it even worse.

If you're struggling with student loans and wondering how you can get your loans reduced,  loan forgiveness programs may be an option for you.