Navient Lawsuit: What Student Borrowers Need to Know

Navient Lawsuit: What Student Borrowers Need to Know

Navient Corp., a serious servicer of personal and federal student loans, is dealing with six lawsuits alleging that it harmed student loan debtors all through the reimbursement course of. The fits are nonetheless pending and will take years to conclude. In the meantime, listed here are solutions to widespread borrower questions:

What is the Navient lawsuit?

The U.S. Consumer Financial Protection Bureau and the Illinois and Washington attorneys common sued Navient in January 2017. Pennsylvania’s lawyer common filed a swimsuit in October 2017. The California and Mississippi attorneys common filed fits in June and July 2018, respectively.

Among different issues, the CFPB alleges that since no less than January 2010, Navient has:

  • Steered struggling debtors towards a number of forbearances as an alternative of income-driven reimbursement plans, and

  • Provided unclear details about methods to re-enroll in income-driven reimbursement plans and methods to qualify for a co-signer launch.

The CFPB is asking Navient to compensate the debtors the company says had been 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 throughout 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 stays ‘forbear them, forbear them, make them relinquish the ball.’ Said one other means, we’re very liberal with the usage of forbearance as soon as it’s decided {that a} borrower can not pay money or make the most of different entitlement packages.”

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 factor as a “Navient student loan forgiveness” program, and it’s unlikely that Navient borrowers will get the compensation the CFPB is requesting anytime soon.

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.

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 non-public 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.

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.

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 additionally alleges that Navient incorrectly reported disabled debtors’ accounts as “in default” when the debtors had really gotten loan aid by way of the federal government’s Total and Permanent Disability discharge program. To guard towards a mistake like that, which may severely damage your credit rating, examine your credit report for errors. You can get one free credit report yearly from every of the three main credit bureaus, Equifax, Experian and TransUnion.

Student loan servicers are supposed that can assist you perceive the assorted reimbursement choices. By studying in regards to the choices your self, you could be empowered to carry your loan servicer to that normal. However, every of the next choices has dangers.

  • Income-driven reimbursement plans can decrease your month-to-month federal student loan funds by capping your cost at a share of your revenue. They additionally supply loan forgiveness after you make on-time funds for 20 or 25 years, relying on the plan.

  • Student loan forgiveness packages, akin to Public Service Loan Forgiveness, can relieve your federal student loan debt for those who work for a sure sort of employer and make on-time funds for a sure time frame.

  • Federal consolidation doesn’t decrease your month-to-month funds or prevent cash, however it’s typically essential to qualify for income-driven reimbursement or a forgiveness program. Consolidating is steadily confused with student loan refinancing, which is a means to economize on curiosity by getting a decrease fee. But for those who refinance federal student loans, you lose federal loan forgiveness and reimbursement choices.

You can join the choices above by yourself free of charge. But some firms that aren’t affiliated with the Department of Education capitalize on subpar student loan servicing practices by charging charges to enroll debtors in free federal student loan packages. So-called student debt aid firms typically promote messages akin to “Obama Student Loan Forgiveness” on Facebook and Google. If you’re tempted by such a suggestion, know that you simply don’t should pay for student loan assist.

If your servicer isn’t answering your student loan questions, contact the Department of Education or your state’s lawyer common’s workplace for assist.

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