Have you ever felt like you will make payments on your student loans forever? How many times have you called Navient Student Loan Servicing to have a student loan customer service representative tell you that you are not eligible for a lower payment, but you can go into forbearance?
You may feel as though you'll never be able to pay back your Navient student loans. As it turns out, it may not be your fault. Many borrowers have faced similar issues with Navient. And recent litigation has brought these alleged unfair practices to the forefront.
This article will help you understand the Navient lawsuit, as well as your options to pay down your student loan in the most efficient way possible. At the end of the article, there are several resources to take immediate steps to optimize savings on your student loan repayment plan.
If Navient is your student loan servicer, then you will want to pay close attention as you are reading this. Even if Navient is not your student loan servicer, this article will be an eye-opening read for how to approach your student loans moving forward.
Update from the editor: On January 13, 2022, it was announced that Navient had reached a settlement for its lawsuits from 38 states and will cancel $1.7 billion of student debt for 66,000 private student loan borrowers. An additional 350,000 borrowers who were placed in long-term forbearance with Navient will receive about $260 each in restitution (for a total of $95 million).
Who Is Navient Student Loan Servicing?
Navient currently services over $300 billion of government and private student loans. To fully understand the role of Navient, we have to first understand the role of Sallie Mae. Navient is a student loan servicer that was formed after the 2014 Sallie Mae split.
In 1972, Sallie Mae was established as a government-sponsored enterprise (GSE). It was later privatized in 2004 when Congress terminated Sallie Mae’s federal charter. Sallie Mae was a loan servicer for two federal student loan programs: the Direct Loan Program and the Federal Family Education Loan Program. In 2014, Sallie Mae was divided in two parts: the consumer banking business, which is known as Sallie Mae, and the student loan servicing operations, which became Navient.
Navient has grown into one of the largest servicers of student loans since its separation from Sallie Mae. And more than half of its accounts come from a contract with the Education Department, according to the Consumer Financial Protection Bureau (CFPB).
What You Need To Know About The Navient Lawsuits
According to a lawsuit filed by the CFPB, Navient has been faced with allegations of misallocating payments, steering people into costly plans, and supplying the wrong information when borrowers pleaded for help with high monthly payments. Some of the allegations against Navient include misapplied payments, surprise late fees, processing delays, and misrepresentation of repayment options and repayment amounts.
Some of the allegations against Navient include misapplied payments, surprise late fees, processing delays, and misrepresentation of repayment options and repayment amounts. The CFPB and the state attorneys general are all seeking financial redress for borrowers they say were harmed by Navient’s actions.
“The lawsuits are full of deeply disturbing allegations,” said Rohit Chopra, senior fellow at the Consumer Federation of America and the former student-loan point man at the CFPB. “If this is true, then the company’s actions may be responsible for some of the pileup of defaults that we’ve seen in recent years.”
Navient Allegedly Forced Borrowers Into Forbearance
Even more disturbing allegations say that Navient incentivized employees to encourage borrowers to postpone payments through forbearance, an option in which interest continues to accrue, rather than guide borrowers down the correct path and enroll them in an income-driven repayment plan that would avoid fees.
CFPB alleges that Navient racked up $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple and consecutive forbearances from January 2010 to March 2015.
CFPB further alleges Navient misled borrowers about the terms of renewing enrollment in income-driven repayment plans that limit monthly bills to a percentage of earnings, and also over reporting the loan discharge of disabled borrowers to the credit bureaus. The complaint further alleges that Pioneer Credit Recovery, a subsidiary of Navient, made illegal misrepresentations about the federal loan rehabilitation program available to defaulted borrowers.
The CFPB Lawsuit Is Not The Only Lawsuit Against Navient
In addition to the CFPB’s allegations, Illinois Attorney General Lisa Madigan and Washington Attorney General, Bob Ferguson, also filed separate lawsuits. Navient was the subject of a multiyear investigation, which reviewed its business practices, which uncovered the issues that led to the lawsuits.
Illinois and Washington allege that Navient and its former parent company Sallie Mae provided “risky and expensive” subprime private student loans that carried high interest rates and fees. Madigan notes that the loans were mostly provided to students enrolled in for-profit colleges.
Past Lawsuits Involving Service Members and Disabled Veterans
This is not the first time Navient has had issues with regulators. The Justice Department fined the company millions of dollars for unlawfully charging active-duty service members high interest rates and late fees on student loans, violations that the company called “processing errors.”
That case escalated to a dispute between congressional Democrats and the Education Department, which revealed that Navient charged some military personnel more than 6% interest as permitted by law. Erroneous reports of loan discharge also result in adverse tax consequences, because the loan discharge amount is treated as income.
Sen. Elizabeth Warren (D-Mass.), a longtime critic of Navient, said the CFPB’s lawsuit “could help put money back in the pockets of thousands of borrowers, including disabled veterans who have been harmed by this company’s repeated law breaking.”
Navient claims that the lawsuit is politically motivated, and denied all allegations. In a statement, Navient contends that the standards the CFPB are using to reach its conclusions are “inconsistent” with the Education Department’s regulations.
How Do The Navient Lawsuits Affect My Student Loans?
Whether Navient is your student loan service provider or not, you should get up to speed on all the options that are available to you today.
First, you may have already been told that you are locked into high monthly payments believing there is no other option. But you may have options to minimize fees, reduce your monthly payments, or lower your interest rate. Read our article on income-based repayment plans and repayment options to see if you have a better potential solution.
If your student loan servicing provider inaccurately report missed or late payments to the credit bureau, these mistakes will have an adverse impact on your credit report. Make sure that you are actively disputing items that are incorrect on your credit report. We recommend using a free service like Credit Karma to monitor your credit and help you take action if things aren't correct.
Am I Entitled To Damages From The Navient Lawsuit?
Maybe. About 350,000 private student loan borrowers who were steered towards long-term forbearance will be receiving a total of $95 million in restitution from Navient. That works out to about $260 per borrower. If you're one of the borrowers who are eligible for restitution, Navient says that you should be notified by mail in the spring of 2022.
How To Contact Navient Customer Service
Phone number: (800) 722-1300
Hours of operation: 8-9. Mon-Thurs and 8-8 on Fri (ET)
General mailing address:
Navient – U.S. Department of Education Loan Servicing
P.O. Box 9635
Wilkes-Barre, PA 18773-9635
Address for sending payments:
Navient – U.S. Department of Education Loan Servicing
P.O. Box 4450
Portland, OR 97208-4450
Email/online contact form: Must sign in to your account before you can send an email to customer service.
Where Can I Get More Help For My Navient Student Loans?
If you’re struggling with Navient and you're not quite sure what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you build a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
If you have a strong credit score and income, you may want to consider refinancing your student loans away from Navient. It doesn't always make sense to refinance Federal student loans into private loans. But, for some people, it could save them a lot of money in interest charges.
You can pursue student loan refinancing in a variety of ways, but I recommend looking using Credible -- a student loan refinancing marketplace. With Credible, you can receive offers from multiple lenders after filling out one short form. It’s free and you can get an estimate of how much you can save by refinancing in less than a minute.
For more extreme cases, contact the Consumer Financial Protection Bureau. If you want to file a formal complaint regarding your federal loan service or a private student loan, such as a loan issued by a bank, credit union, or school. The CFPB oversees financial services companies and enforces federal consumer financial laws.
We're monitoring the breaking developments in the Navient lawsuits that have been recently settled. We'll continue to update this post as we learn more details.
While your student loan servicer is there to help you understand your available options for student loan repayment, you must do your due diligence to explore all of your options.
We are here to help you make decisions that will lead you towards financial freedom. Be sure to check out our Definitive Guide To Student Loan Debt. If you have a question, our student loan debt forum is packed with solutions to your most common student loan questions.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Editor: Clint Proctor