Many people may be surprised to learn that federal student loans, in spite of being funded by the Department of Education, are actually managed and collected by third-party organizations. These companies, known as student loan servicers, are not always well-liked by the college graduates whose debt they handle.
Sometimes, friction between borrowers and student loan servicers can take the form of legal action, as it has in a series of lawsuits aimed at Navient — one of the largest student loan servicing companies. The outcome of these lawsuits may have serious implications for the way student loans are handled nationwide, so if you took on any student debt in order to pay for school, you should be watching the Navient class action lawsuit with interest.
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Navient is a student loan servicer. That means that they are responsible for managing the student loans of the borrowers who are assigned to Navient by the Department of Education. If you take out student loans, your servicer will be assigned to you as soon as your very first student loan is disbursed. If you’re at a point where you’re making payments on your student loans and you’re not paying through Navient, then you probably have a different student loan servicer. However, you should still pay attention to these lawsuits because they could have implications for the practices that other companies adopt.
Many people may remember a time when Sallie Mae and Navient were the same company. However, today they are two separate entities. In 2014 Sallie Mae created Navient as an offshoot. Up until that point, Sallie Mae had been a student loan servicer that acted on behalf of the Department of Education to manage student loan repayment plans, requests for consolidation, and the collection of student loan payments. However, thanks to a law passed in 2010 that prevents private lenders from servicing federal student loans, Sallie Mae was forced to shift those duties to Navient, while the original company continued offering private student loans.
Today, Navient acts as an agent of the Department of Education. Thanks to its role as a servicer on behalf of the Department of Education, Navient is required to conduct itself in certain ways that don’t conflict with the federal government’s mission. This is how we arrive at the lawsuits that Navient is facing today.
Right now, Navient is engaged in legal controversy with multiple entities, including:
- The Consumer Financial Protection Bureau (CFPB) and the attorneys general for the states of Illinois and Washington, which collectively sued Navient in 2017.
- The attorney general for Pennsylvania, which also sued Navient in 2017.
- The attorney general for California, which filed suit against Navient in the summer of 2018.
Navient is being sued over the followed alleged acts, which the CFPB argues are unfair to borrowers:
- Misrepresenting how it would apply extra payments made by borrowers. Borrowers with extra cash often try to pay extra towards the student loans that they have that have the highest interest rates. Allegedly, Navient was dishonest in the way that they allocated those extra payments.
- Direct borrowers away from income-driven repayment plans in favor of forbearance. Income-driven repayment plans are a powerful tool for those who are having trouble paying back student loans. They will adjust a borrower’s monthly payments to reflect their income, helping people to continue repaying student loans at a rate that works for them. Navient has allegedly been pushing forbearance — an option with less paperwork that helps the company collect more money — over income-driven repayment plans in a way that is unfair to borrowers, who deserve full and complete access to all available repayment options.
- Sharing false information about disability loan forgiveness. It is possible to have your student loans forgiven under certain conditions of total and permanent disability. Allegedly, Navient has falsely told borrowers that they must have a permanent inability to work in order to qualify, which is not included in the Department of Education’s guidelines.
It’s important to note that, while the things Navient is alleged to have done would constitute unfair treatment of student debt holders, Navient is still a legitimate company that acts on behalf of the Department of Education. Even if these allegations are true, what Navient has allegedly done is different from student loan scams, which can also be the target of lawsuits.
Navient has not taken these allegations lying down, of course. The company claims that any allegations of wrongdoing are unfounded. According to Navient, the lawsuits directed against them are an attempt to blame the failings of higher education in general — such as the high cost of an college and a complicated student loan system — on a single company, when it is the system itself that is at fault.
Although the Navient class action lawsuit is making headlines these days, it will likely be some time before a settlement is reached. The CFPB is asking for Navient to provide some kind of compensation for borrowers that have allegedly been victims of Navient practices. In 2014, Navient settled with the Justice Department over another lawsuit and ended up paying out $60 million to about 78,000 service members. In this lawsuit, Navient was alleged to have failed to honor the interest rate cap that service members get on student loans and other forms of debt.
Right now, the Navient lawsuit is in the discovery process, where evidence is gathered. Due to the sheer scope of this lawsuit and the amount of evidence that needs to be gathered, it could be years before we hear anything definitive.
If you are a borrower whose loans are serviced by Navient and you believe that you may have been harmed by some of the practiced that Navient has allegedly undertaken, then you may be able to join the Navient lawsuit, providing your information as evidence and possibly receiving compensation in a hypothetical settlement.
If you are uncertain as to whether or not Navient is your student loan servicer, you can log in to the Federal Student Aid portal. There, you will be able to see the officially designated servicing agency for each of your student loans.
If you have a general complain about Navient as your student loan servicer, you can submit a formal complaint to the CFPB. Residents of Illinois, Washington, Pennsylvania, California, or any other states that may join the lawsuit in the future can contact the attorney general’s office for their state to ask about joining the Navient lawsuit.
If you are considering joining in the lawsuit against Navient, be sure that you have realistic expectations for what you might get out of it. If the CFPB wins its case or a settlement is reached on the matter, then you may just end up receiving compensation proportional to what you lost as a result of the alleged practices by Navient.
There is no plan for any sort of Navient student loan forgiveness to be available to borrowers whose debt was or is currently managed by Navient. Existing student loan forgiveness programs will continue to focus on loan forgiveness for public service, teachers, and nurses.
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