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Navient is a servicer of both federal and private student loans. While the company is one of the largest servicers in the industry, it currently faces lawsuits focused on violations of consumer protection laws.
Concerns around Navient’s practices began before 2015, but it wasn’t until 2015 that the Consumer Financial Protection Bureau (CFPB) sent Navient a letter telling the company that there was enough information to believe they violated laws.
To better understand the Navient lawsuit, and if it has any impact on you, continue reading below.
On this page:
- Timeline of Navient lawsuits
- CFPB’s lawsuit against Navient
- State lawsuits against Navient
- American Federation of Teachers lawsuit against Navient
- What does this mean for you?
- What is Navient saying during all of this?
A timeline of Navient lawsuits
- January 2017: The CFPB announced it was suing Navient for “systematically and illegally failing borrowers at every stage of repayment.”
- January 2017: Illinois files a lawsuit claiming Navient “engaged in widespread unfair and deceptive subprime lending, failed to offer proper repayment options & engaged in deceptive collection practices.”
- January 2017: Washington files a lawsuit alleging “multiple deceptive student loan lending, servicing and debt collection practices.”
- October 2017: Pennsylvania files a lawsuit alleging “widespread deceptive practices and predatory conduct.”
- June 2018: California charges Navient with “deceitful practices and debt-collection misconduct”
- July 2018: Mississippi charges Navient with “deceptive and unfair practices in violation of Mississippi’s consumer protection laws.”
- October 2018: Members of the American Federation of Teachers announce a lawsuit alleging the company deceived borrowers about their options through the public service loan forgiveness program.
The CFPB’s lawsuit against Navient
In January of 2017, the CFPB sued Navient for failing borrowers during repayment. The suit claimed that Navient created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained.
At the time, CFPB Director Richard Cordray said “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them..”
Some of the specific allegations include:
- Failed to correctly apply borrower payments to their accounts: Navient repeatedly misapplied payments from borrowers. The company failed to correct errors made unless a consumer contacted the company about the error.
- Steers struggling borrowers toward paying more than they need to: Navient is believed to have steered those with federal student loans who were struggling with repayment into forbearance rather than repayment plans that have a lower monthly payment. These decisions resulted in up to $4 billion in interest charges between 2010 and 2015.
- Obscured information borrowers needed to maintain their lower payments: Navient inadequately informed borrowers of deadlines and consequences of not certifying their income and family size when enrolled in income-driven repayment plans. These actions caused many borrowers to lose their affordable monthly payments.
- Deceived private student loan borrowers about cosigner release requirements: In order to release a cosigner, borrowers must meet a certain number of consecutive, on-time payments. However, Navient allowed borrowers to prepay monthly payments in advance and told them that they can skip upcoming payments if they did this. This action ultimately reset the counter on the number of consecutive payments the borrower made to zero.
- Harmed the credit of disabled borrowers, including veterans: Severely and permanently disabled borrowers with federal student loans, including veterans, have a right to seek loan forgiveness through the federal Total and Permanent Disability discharge program. Navient misreported these discharges as defaults to the credit reporting companies. These actions could have damaged the credit report of a number of borrowers.
Currently, the lawsuit is still open and may not be closed for some time. To view the entire complaint, click here.
State lawsuits against Navient
Following the CFPB’s announcement of its lawsuit against Navient, six states followed suit.
- Illinois: In January 2017, filed by Attorney General Lisa Madigan
- Washington: In January 2017, filed by Attorney General Bob Ferguson
- Pennsylvania: In October 2017, filed by Attorney General Josh Shapiro
- California: In June 2018, filed by Attorney General Xavier Becerra
- Mississippi: In July 2018, filed by Attorney General Jim Hood
The lawsuits being filed by the states listed above are all based on the allegations made by the CFPB.
American Federation of Teachers lawsuit against Navient
In October 2018, members of the American Federation of Teachers filed a class-action lawsuit against Navient in federal court.
This lawsuit alleges that Navient misled borrowers in public service professions from accessing loan forgiveness through the public service loan forgiveness (PSLF) program.
This misinformation was said to occur in an effort by the company to boost its own profits. These profits were created by keeping borrowers from transferring their loans to FedLoan (the servicer for PSLF) and putting some of them into forbearance during difficult times.
Forbearance puts your repayment on hold, but interest charges continue to accrue.
The lawsuit is still open and can be viewed in full, here.
What does this mean for you?
As the servicer of more than 12 million borrowers, there is a good chance you may have loans serviced by Navient.
Since the lawsuits are ongoing, there is no financial reward you can recoup at this time. However, all of these lawsuits seek financial compensation for those affected by the alleged practices.
Once these lawsuits are resolved, those affected will likely be alerted and next steps will be outlined. For now, don’t fall for anything promoting Navient student loan forgiveness. There is no such thing.
If you are interested in better understanding your loan forgiveness options, check out our student loan forgiveness guide.
What is Navient saying during all of this?
Navient has strongly denied any wrongdoing and the company posted a response to these allegations to its website.
The response begins with two “facts.” The first fact states customers through Navient are far less likely to default on their federal student loans than borrowers serviced by other companies.
The second fact claims that Navient is a leader in helping customers who need a lower payment on their federal student loans enroll in a plan that bases the monthly payment on their incomes.
You can check out Navient’s response to these lawsuits, here.
Author: Jeff Gitlen