Navient Lawsuit: What Student Loan Borrowers Need to Know

File complaints if necessary, check your credit report, and learn about repayment options.

Teddy Nykiel, Anna HelhoskiJune 23, 2020
navient-student-loan-lawsuit
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Navient Corp., a major servicer of private and federal student loans, is facing six lawsuits alleging that it harmed student loan borrowers throughout the repayment process. The suits are still pending and could take years to conclude. In the meantime, here are answers to common borrower questions:

What is the Navient lawsuit?

The U.S. Consumer Financial Protection Bureau and the Illinois and Washington attorneys general sued Navient in January 2017. Pennsylvania’s attorney general filed a suit in October 2017. The California and Mississippi attorneys general filed suits in June and July 2018, respectively.

Among other things, the CFPB alleges that since at least January 2010, Navient has:

  • Misallocated payments

  • Steered struggling borrowers toward multiple forbearances instead of income-driven repayment plans, and

  • Provided unclear information about how to re-enroll in income-driven repayment plans and how to qualify for a co-signer release.

» MORE: Student loan servicers: What they are and what they do

The CFPB is asking Navient to compensate the borrowers the agency says were harmed. Navient believes the CFPB’s claims are “unfounded," and says the suits are based on new servicing standards that are being applied retroactively, according to an October 2017 fact sheet.

The Illinois, Washington and Pennsylvania suits make similar claims to the CFPB’s allegations. They also allege that Navient, when it was part of Sallie Mae, made subprime loans to students, particularly those attending for-profit schools. Navient broke off from Sallie Mae Bank, one of the largest private student loan lenders, in 2014.

In August 2017, a U.S. District Court judge denied Navient’s motion to dismiss the CFPB’s case. The case is now moving toward the discovery process of gathering evidence, which could lead to further motions, a trial or a settlement, says Suzanne Martindale, a staff attorney at Consumers Union, the policy and action arm of Consumer Reports.

The lawsuits could take years to play out “because of the sheer amount of evidence” that the CFPB and the states have gathered during their investigations, Martindale says.

In September 2019, the lawsuit uncovered an internal memo that shed light on Navient's strategy for collecting loan payments. It was written in 2010 by a senior director at Navient's former parent company, Sallie Mae. On the topic of forbearance, the memo indicated, "Our battle cry remains 'forbear them, forbear them, make them relinquish the ball.' Said another way, we are very liberal with the use of forbearance once it is determined that a borrower cannot pay cash or utilize other entitlement programs."

The CFPB and states attorneys general argue Navient steered borrowers away from income-driven repayment plans and toward forbearance — a temporary pause in payments. Forbearance can be used in multiple situations, such as job loss or any other decrease in income. However, forbearance can increase the overall debt borrowers owe because interest continues to build and is added to the principal when repayment begins again.

Income-driven repayment, on the other hand, would have allowed borrowers experiencing financial difficulty to continue making payments set at a portion of their discretionary income. Payments change as income changes, but the continuous payment record helps count toward the 20 or 25 years needed to qualify for forgiveness of the remaining balance. Payments skipped in forbearance don't. In addition, income-driven plans help limit the amount of interest accrued and keep it from being added to the loan principal.

What new practices is Navient using going forward?

Navient says it will “enhance” its call center practices to better serve federal student loan borrowers who are potentially eligible for relief under the Public Service Loan Forgiveness program by identifying them and providing them with information.

These new measures are part of a June 2020 settlement with the American Federation of Teachers. The union alleged Navient’s practices led public service workers to be denied loan forgiveness or miss out on the best possible payment plan.

The settlement also includes a contribution of $1.75 million to a to-be-named nonprofit organization that will provide education and student loan counseling to public service workers, according to a June 19, 2020 news release.

Under the new agreement, Navient will train its customer service representatives to recognize words and phrases that indicate a borrower might be eligible for PSLF or another loan repayment plan.

“The agreement is a good illustration of how borrowers and servicers can work together for the benefit of both parties,” said Randi Weingarten, president of the American Federation of Teachers, in the release. “It acknowledges that PSLF is a vital program for many graduates who forgo larger salaries in the corporate sector to serve the public instead.”

Navient is expected to self-report on its compliance with these new practices, but it’s not clear to whom.

Is Navient student loan forgiveness real?

There's no such thing as a "Navient student loan forgiveness" program, and it's unlikely that Navient borrowers will get the compensation the CFPB is requesting anytime soon.

» MORE: How to get loan forgiveness through borrower defense to repayment

Navient borrowers with federal student loans may be eligible for one of the federal student loan forgiveness programs, such as Public Service Loan Forgiveness or forgiveness through an income-driven repayment plan. However, forgiveness through these programs takes diligence and it isn't immediate. It takes at least 10 years of making on-time payments to qualify for PSLF, for instance.

Is Navient my student loan servicer?

Your student loan servicer is the company you make payments to each month. It’s not always the same company that lent you money in the first place.

» MORE: Navient customer service: What they can do and how to contact

Here’s how to tell which company services your student loans:

  • For federal loans: Log on to the Federal Student Aid website using your FSA ID. Click on the blue numbers in the loan table to see more details about each loan, including your “Current ED servicer.” It may be Navient, or it could be another company such as FedLoan Servicing, Great Lakes Higher Education or Nelnet.

  • For private loans: If there’s no record of your student loans in the Federal Student Aid system, the loans are private. Log on to your online loan account, if you have one, or check your last loan statement. The company powering the account or sending the statement is your loan servicer.

  • Not sure whether your loans are federal, private, or a mix of both? Navient services both federal and private loans. Check your credit report to see all of your education debts, including federal and private student loans.

» MORE: What federal student loan servicers might not tell you

How can I switch student loan servicers?

It is possible to switch student loan servicers through federal student loan consolidation or private student loan refinancing. But you shouldn’t consolidate or refinance solely to switch servicers, because there are potential risks associated with each, says Adam Minsky, a Boston-based lawyer specializing in student loans. Also, there’s no guarantee you’ll be better off with a different servicer.

“The other servicers aren’t exactly rainbows and sunshine,” Minsky says.

» MORE: How to change student loan servicers

Consider refinancing only if you can comfortably afford your expenses, student loan payments and other debts, and you have good credit. Once you refinance federal student loans, they’ll no longer be eligible for income-driven repayment plans or forgiveness programs.

Like with many student loan choices, it depends. Weigh the pros and cons before making a decision.

Benefits of consolidating:

  • Option to choose a new servicer.

  • Combine multiple federal loans into one.

  • Retain eligibility for income-driven repayment and forgiveness programs.

  • May lower payments by extending repayment term.

Downsides of consolidating:

  • Progress made toward loan forgiveness will be erased.

  • Won’t lower interest rate or save money.

  • May extend repayment period, increasing interest costs over time.

What else can I do to protect myself?

Even if you can't change servicers, there are several things you can do to voice your concerns and protect yourself as a borrower: File complaints, check your credit report for errors, learn about your repayment options, and watch out for companies that charge fees for student loan help.

If Navient is you're servicer, you can Submit a complaint to Navient's Office of the Consumer Advocate. Call 888-545-4199 or email [email protected] You can then file complaints to one or more of the following entities:

If a complaint doesn’t help, you can contact the Federal Student Aid Ombudsman Group. This method should be used only as a last resort, says the federal student aid office. Complete all information on the Ombudsman Information Checklist before contacting. When you’re ready to reach out, here’s how to get in touch:

Phone: 877-557-2575 By mail: U.S. Department of Education FSA Ombudsman Group P.O. Box 1843 Monticello, KY 42633

The CFPB also alleges that Navient incorrectly reported disabled borrowers’ accounts as “in default” when the borrowers had actually gotten loan relief through the government’s Total and Permanent Disability discharge program. To guard against a mistake like that, which could severely hurt your credit score, check your credit report for errors. You can get one free credit report every year from each of the three major credit bureaus, Equifax, Experian and TransUnion.

Student loan servicers are supposed to help you understand the various repayment options. By learning about the options yourself, you can be empowered to hold your loan servicer to that standard. However, each of the following options has risks.

  • Income-driven repayment plans can lower your monthly federal student loan payments by capping your payment at a percentage of your income. They also offer loan forgiveness after you make on-time payments for 20 or 25 years, depending on the plan.

  • Student loan forgiveness programs, such as Public Service Loan Forgiveness, can relieve your federal student loan debt if you work for a certain type of employer and make on-time payments for a certain period of time.

  • Federal consolidation doesn’t lower your monthly payments or save you money, but it’s sometimes necessary to qualify for income-driven repayment or a forgiveness program. Consolidating is frequently confused with student loan refinancing, which is a way to save money on interest by getting a lower rate. But if you refinance federal student loans, you lose federal loan forgiveness and repayment options.

You can sign up for the options above on your own for free. But some companies that aren’t affiliated with the Department of Education capitalize on subpar student loan servicing practices by charging fees to enroll borrowers in free federal student loan programs. So-called student debt relief companies often advertise messages such as “Obama Student Loan Forgiveness” on Facebook and Google. If you’re tempted by such an offer, know that you don’t have to pay for student loan help.

If your servicer isn’t answering your student loan questions, contact the Department of Education or your state’s attorney general’s office for help.

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