Navient, the nation’s largest servicer of federal and private student loans, is being sued for systematically and illegally failing borrowers at every stage of repayment.
For years, Navient, formerly part of Sallie Mae, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained, the Consumer Financial Protection Bureau said Wednesday.
Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans.
“For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” said Richard Cordray, director of the bureau. “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs.”
Navient services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the U.S. Department of Education.
Named in the lawsuit are Navient Corp. and two of its subsidiaries: Navient Solutions, a division responsible for loan servicing operations, and Pioneer Credit Recovery, which specializes in the collection of defaulted student loans.
A servicer is often different from the lender, and borrowers usually have no control over which company is assigned to service their loans.
Starting in 2009, many federal student loan borrowers gained the right to make payments based on how much money they earn, as part of the federal government’s effort to make student loans more affordable. Navient made it harder for borrowers to get this right, the lawsuit alleges, adding its illegal practices made paying back student loans more difficult and costly for some borrowers.
In the lawsuit, the bureau charges that Navient:
- Fails to correctly apply or allocate borrower payments to their accounts.
- Steers struggling borrowers toward paying more than they have to on loans.
- Obscures information consumers needed to maintain their lower payments.
- Deceives private student loan borrowers about requirements to release their co-signer from the loan.
- Harms the credit of disabled borrowers, including severely injured veterans.
The bureau also alleges that Navient, through Pioneer, made misrepresentations about the federal loan rehabilitation program for borrowers in default. Pioneer falsely stated or implied that being in the program would remove negative information about the defaulted loan from the borrower’s credit report. Pioneer also said that collection fees would be forgiven on completion of the program.
In 2015, the bureau released a report showing widespread servicing failures in the handling of federal and private student loan.
Today more than 44 million federal and private student loan borrowers owe about $1.4 trillion.
Students and their families can find help on how to handle their student debt on the bureau’s website. Those having problems related to repaying student loans or debt collection can also submit a complaint to the bureau.