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There’s a new Navient lawsuit.
Here’s what you need to know—and what it means for your student loans.
Student Loans
New Jersey Attorney General Gurbir S. Grewal filed a lawsuit in New Jersey Superior Court today alleging that Navient, one of the nation’s largest student loan servicers, “engaged in unconscionable commercial practices, deceptive conduct, and misrepresentations when servicing thousands of New Jersey consumers’ student loans.”
“Higher education should be a pathway to success, not a road to financial ruin,” Grewal said. “Yet even before the financial fallout from the COVID-19 pandemic, too many New Jerseyans were struggling to pay off their student loans. And the financial situation of too many student loan borrowers was made worse because their loan servicers put corporate profits above the borrower’s best interests.”
Navient, which spun off from Sallie Mae, has more than 12 million student loan customers and services more than $300 billion of government and private student loans.
The Allegations: Navient student loans
The allegations against Navient include:
1. Steering borrowers into forbearance instead of income-driven repayment plans
- Forbearance More Costly: New Jersey claims that Navient puts profits ahead of people by allegedly steering student loan borrowers toward forbearance (pausing student loan payments) instead of income-driven repayment plans (which bases your student loan payment on discretionary income and family size).
- Income-Driven Repayment Better Option: The state argues that Navient should serve the borrower’s best interests, not its own, and therefore should help borrowers choose the best student loan repayment option. Rather than invest the time and resources to help borrowers who face long-term financial hardship, New Jersey claims that Navient chose the costlier option of forbearance.
- Result Is Borrowers Paid More Interest: As a result, borrowers steered into forbearance “suffered consequences including the unnecessary accrual of interest, the addition of interest to the principal, and lost months of timely payments that would have otherwise counted toward loan forgiveness.”
- Borrowers Didn’t Recertify Income: New Jersey claims Navient did not properly warn borrowers when to recertify their income for income-driven repayment plans. As a result, borrowers’ income-driven repayment plans may have expired, which resulted in a higher student loan payment.
2. Enticing borrowers to borrow private student loans with a cosigner, then making it exceedingly difficult to obtain a cosigner release
- Cosigners: New Jersey alleges that Navient encouraged borrowers to get cosigners guarantee student loans, which “increased Navient’s chances of being repaid if the student defaulted.”
- Cosigner Release Difficult: Once the cosigner was approved, New Jersey alleges that Navient made it difficult to release a cosigner from a student loan.
3. Misleading borrowers about the amount of their student loan delinquency
- Tricky Language: New Jersey alleges that Navient employees were “trained to attempt to collect more than the past due amount by using language that misled borrowers about how much they owed.”
- Overpayment?: New Jersey claims that Navient collected delinquent student loan payments and next month’s payment by calling the amount “Present Amount Due,” which may have resulted in borrowers overpaying.
“Not only are these recycled baseless allegations, Navient has consistently delivered excellent service to student loan borrowers, helping millions of people realize the benefits of higher education and successfully pay off their loans,” Navient said in a statement to The Hill. “As a servicer for the federal government, we have led enrollment in affordable payment plans and driven down default rates. In fact, over half of the loan portfolio we service is enrolled in income-driven repayment.”
What The Navient Lawsuit Means For Your Student Loans
If you have a student loan, you’ve probably had to deal with a student loan servicer, which is the company to whom you send monthly student loan payments. You don’t have to live in New Jersey to be affected by your student loan servicer. While this lawsuit alleges several unfair and deceptive practices, and may not apply to your situation, it’s important for you to get educated on your student loans. Make sure you understand the following when managing student loan repayment:
1. Understand all your options
When it comes to student loan repayment, the good news is you have several options. However, don’t expect your student loan servicer to tell you which option is best. Here are four solid options, all of which have no fees:
- Student loan refinancing (get a lower rate, save money)
- Student loan consolidation (get organized)
- Income-driven repayment plans (payment plan for federal loans)
- Student loan forgiveness (public service)
2. Confirm in writing
Your gut instinct may be to call your student loan servicer. However, your best bet is to correspond in writing with your student loan servicer to ensure a written record of communication.
3. File a student loan complaint
If you have an issue with your student loan servicer, know your rights. You can file a formal complaint with:
- Your lender
- Your student loan servicer
- State Attorney General
- State Department of Education
- U.S. Department of Education
- Federal Trade Commission
- Consumer Financial Protection Bureau
Make sure you have supporting documentation. It’s also possible that your student loan servicer may be able to solve the issue first.
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