If you have a student loan, there is a high chance that you already know Navient. In 2014, Sallie Mae divided its operations into two different entities, Sallie Mae Bank and Navient. By serving more than 12 million borrowers, Navient is servicing and collecting debt from almost one-fourth of all debtors in the U.S. Unfortunately, such significant control over debt collection comes at a cost. Navient frequently faces lawsuits as class-actions or from organizations like the Consumer Financial Protection Bureau. This guide will present 2020 Navient lawsuit updates with detailed background information. Besides, we will discuss the options borrowers have to avoid such legal hassles and get rid of the debt efficiently.
Navient vs. American Teachers Federation- Settled (May 2020)
As Navient serves more than 10 million students, any Navient lawsuit update creates a huge excitement among the borrowers. In May 2020, it was announced that Navient agreed to a settlement with the American Federation of Teachers. This federation is the second-largest union of teachers in the U.S. The lawsuit among these parties started back in October 2018. The federation sued Navient, claiming that the loan servicer misled debtors. Instead of informing the borrowers about financial assistance programs like the Public Service Loan Forgiveness, the loan servicer recommended repayment plans or forbearance programs. It should be clarified that the PSLF is a forgiveness program that eliminates the debt after the borrower makes 120 eligible, successful payments. As a result of Navient’s misdirection, many borrowers did not benefit from the forgiveness program, and they lost their chances for collecting points from their previous qualifying payment.
In reality, the cause of this lawsuit is common in claims against Navient. Some other lawsuits, like the one filed by a New Jersey Attorney, also blamed Navient in misdirection. The American Teacher Federation claimed that Navient did not want the borrowers to utilize the Public Service Loan Forgiveness program because they would lose the clients. The forgiveness program’s loan servicer is FedLoan Servicing. If the borrowers applied for forgiveness, instead of forbearance or repayment plans, they would move to FedLoan. Therefore, allegedly, Navient did not want to lose fees and profits. In return for this unfair direction, the borrowers demanded to be paid in total millions of dollars, which they lost by not utilizing the forgiveness program.
Navient Lawsuit Update: Details of Settlement
The lawsuit that started in 2018 ended with a Navient lawsuit update announced in 2020. Although the American Federation of Teachers and the Navient agreed on a settlement, the settlement still eliminated some of the proposed claims. The judge dismissed such claims because they were unclear and lacked proof. However, for the rest of the claims, the Navient did not admit any wrongdoing, but the parties agreed on a settlement.
First, Navient agreed to pay $15,000 to 10 plaintiffs to cover their losses. Besides monetary benefits, they also agreed to take action to ensure that such problems never happen again. For example, Navient will pay $1.75 million to an independent educational establishment. This organization will teach borrowers in public service about the process, benefits, application details, etc., of the Public Service Loan Forgiveness program. Besides, the loan servicer agreed to train the customer service employees so that they can identify eligible borrowers for PSLF and can direct them. During the communication between the customer service member and the borrower, Navient will monitor to ensure the debtor gets accurate information. Lastly, the organization will create informative templates to share with the borrowers interested in the forgiveness program.
Interestingly, the parties did not make any public comment about the settlement. However, what borrowers need to know from this Navient lawsuit update is that they have to research all their possible loan solutions.
Get a Third-Party Help
Debtors should not expect any organization related to their loans to provide complete, clear, and unbiased information about their debt. If you want to eliminate your debt, you have to do your own research about the possible options. Alternatively, you can get expert help from third-party organizations, such as Student Loans Resolved, if you are struggling to make payment. Being unaware of the possible relief opportunities will cost you thousands of dollars. Hence, take action now to minimize your loss.
Navient vs. Consumer Financial Protection Bureau Update (June 2020)
Consumer Financial Protection Bureau(CFPB) is another entity that sued Navient for failing borrowers. In 2017, they announced the lawsuit against Navient Corporation and its two subsidiaries. The director of CFPB said that Navient did not give borrowers a fair chance to repay the loans and deceived debtors for cutting costs from operational activities. Allegedly, Navient customer service provided wrong or incomplete information, processed payments incorrectly, or did not take necessary measures when borrowers faced financial challenges in the repayment period. In the following sections, we will present the claims and Navient lawsuit update of 2020.
Incorrectly Processing Funds
A loan servicer is a medium between a borrower and a lender. The loan servicer receives funds from the borrower and allocates them to multiple loans depending on the instructions. In this Navient lawsuit, the Consumer Financial Protection Bureau claimed that the loan servicer employees made mistakes during payment applications. Allegedly, they misapplied or misallocated payments several times. Besides, Navient did not take corrective actions unless the debtor became aware and complained about the problem.
This claim is again common in the lawsuits against Navient. The CFPB argued that the Navient did not take the necessary steps when borrowers faced financial challenges. In general, the CFPB believes that the borrowers should move to Income-driven plans or apply to forgiveness programs if they have financial struggles. Income-driven plans depend on the revenue levels and allow debtors to pay less when their income declines.
However, allegedly, instead of directing borrowers to Income-driven Repayment plans or forgiveness programs, the loan servicer recommended forbearance. Forbearance is a temporary period of non-payment. Yet, during this period, the interest continues to accumulate. As a result, in just five years- between 2010 and 2015- the loan servicer added $4 billion accrued interest to the original debt balance. It was claimed that some borrowers enrolled in multiple forbearance periods. Such borrowers could have saved thousands of dollars if they were directed properly to Income-driven Repayment or other programs.
Another common argument against Navient that happened during this lawsuit is the missed recertification. Borrowers who enroll in Income-driven Repayment plans need to recertify their incomes every year. It was claimed that Navient did not inform the debtors about the deadlines or the consequences of missing the certification. Hence, some borrowers lost their repayment plans. Losing access to a repayment plan means that the debtors will be obliged to repay the accrued interest and lose privileges. Others who try to benefit from loan forgiveness programs that require Income-driven Repayment plans also lost the opportunity for progress.
Cosigner Release Challenges
Navient provides cosigner release benefits to borrowers. If they make a certain number of qualifying payments consecutively, their cosigners can be released. However, the Consumer Financial Protection Bureau claimed that Navient did not fully inform debtors about this process. Navient allows you to make prepayments for future months. Yet, when people make prepayments and do not pay the following month, they lose their progress for consecutive payments to release cosigners. The individuals with prepayments need to start the cosigner release process all over again.
Declined Credit Performance
Loan servicers notify credit rating agencies about student loan payments. Generally, total and permanently disabled debtors do not need to repay the debt when they access a discharge opportunity. This Total and Permanent Discharge program benefits borrowers whose disability is connected to military activity. However, The Consumer Financial Protection Bureau alleged that Navient misinformed the credit agencies about such debtors’ payments. They notified that the borrowers defaulted on their loans while they did not. Hence, such borrowers faced negative consequences on their credit histories, according to the CFPB.
As a result of all these claims, the Consumer Financial Protection Bureau required remedy for borrowers suffering from the fraudulent (allegedly) activities of Navient. Besides, the bureau asked for necessary measures that prevent Navient from future violation of consumer rights.
Navient Lawsuit Update in 2020
In June 2020, Navient filed a summary judgment to end the long-lasting lawsuit without a trial. Navient supported its decision by claiming that the Consumer Financial Protection Bureau does not have enough evidence to prove their allegations. The Navient’s general counsel mentioned that after spending three years analyzing terabytes of data, the CFPB did not get any reasonable evidence. Besides, Navient’s general counsel added that they always informed borrowers about the Income-driven plans before and after the forbearance periods.
New Navient Lawsuit Update (October 2020)
Unfortunately, Navient faces a new lawsuit even before finalizing the currently ongoing ones. In October 2020, New Jersey Attorney General Gurbir S. Grewal filed a new lawsuit against Navient. However, the reason behind this lawsuit was similar to the previously mentioned one- misrepresentation while serving clients. In general, Grewal claimed that Navient leaves the borrowers struggling with the debt because it pursues only corporate profits.
One of the allegations against Navient was that it misled students. Instead of presenting solutions like Income-driven repayment plans and forgiveness programs to struggling debtors, they advised forbearance. Forbearance is a temporary suspension of debt collection. However, during this period, the interest continues to accrue. Later, the interests are added to the principal balance. Hence, borrowers face even bigger challenges and even lose their otherwise qualifying payments for Public Service Loan Forgiveness.
Allegedly, another issue was that the loan servicer missed informing borrowers about recertification of income for Income-driven Repayment plans. As debtors missed recertification, their repayment plans expired, and they were obliged to make higher loan payments.
Cosigner Release Difficulties
Additionally, New Jersey claimed that Navient deliberately made the cosigner release process difficult. A cosigner is usually needed when taking loans. If the loan owner does not make the payments, the consigner will cover the debt. In this way, the lenders guarantee the repayment. However, borrowers can release the cosigner after meeting some conditions if the lender provides such a benefit. The lawsuit claims included that Navient made its loans more attractive by including a cosigner release advantage, but it created barriers when the borrowers wanted to utilize this feature.
The claims of the New Jersey Attorney General also included that the loan servicer misled the students to get more payments. For instance, the loan servicer’s employees used tricky language so that the borrowers paid more than what they owe. Besides, allegedly, Navient collected the following months’ payments as a present due amount.
Is Navient the One to Blame?
Borrowers should keep in mind that the previously mentioned points like misleading students or missing recertification, are only the New Jersey Attorney General’s claims. The lawsuit has not ended yet, and Navient did not admit any wrongdoing. The loan servicer responded that these allegations are baseless, and they always provide high-quality service to borrowers. Additionally, the loan servicer mentioned that they deliver affordable repayment plans, and more than half of their portfolio is based on Income-driven plans.
As in the case of the American Federation of Teachers vs. Navient, the judge may dismiss some, most, or all of the claims at the end of the lawsuit.
What You Should Now from the Lawsuits…
Each Navient lawsuit update is a good reminder for borrowers that they should know their rights regarding debt repayment. Debtors have to understand the loan terms fully and, as mentioned before, possible relief/reduction opportunities available. If you want to avoid future problems and legal consequences, you need to take several actions. First, get familiar with your options. In the following section, we will present the most frequently used debt reduction or relief programs. Second, it is advisable to get help from a financial adviser. A loan servicer like Navient is not a financial adviser. Hence, it can be a waste of time and money, expecting them to direct you to the most beneficial programs. Not every customer service team member is an expert in student loans, and they can miss your problems. Financial debt experts, like the ones in the team of Student Loans Resolved, will guide you properly.
Next, writing should be the preferable way of communication with the loan servicer. If things do not go as planned in a few months, the borrower can use the communication as proof in case of a lawsuit. Lastly, pay extreme attention to any detail of the loan. Usually, student debt is the most important liability of the borrowers. They need to spend much effort and time on this liability to ensure its payment. While taking the loan or while repaying it, read all the documents and double-check if the payments are applied. Do not ignore the debt problem and treat it with caution to avoid future problems.
File Your Complaint on Time
Besides, keep in mind that several organizations will be interested in your complaints if the loan servicer misleads you or engages in fraudulent activity. These parties can be:
- The lender
- The loan servicer
- U.S Education Department
- State Education Department
- State Attorney General
- Consumer Financial Protection Bureau
- Federal Trade Commission, etc.
What are My Options to Stop Debt Struggle?
From the Navient lawsuit update and previous cases the organization faced, it is clear that one should have complete control over the debt and be aware of the possible opportunities. When it comes to student loans, borrowers have access to several programs to ease the repayment process and get relief from the debt fully or partially. Whether you have a federal or private loan, there are options available to you, such as:
- Debt Refinancing
- Debt Consolidation
- Repayment Plans
- Forgiveness programs(for Federal Loans)
- Discharge Programs
- Negotiation with the Lender
In the following sections, we will discuss each option in detail. Borrowers should get familiar with their options and take action if they qualify. Instead of relying on a loan servicer, only in this way, one can manage the debt effectively. Alternatively, you can contact debt specialists like Student Loans Resolved to ask your questions and get recommendations on moving forward.
Debt refinancing is one of the greatest options for private loan borrowers. While the government provides many opportunities, like repayment plans, forgiveness, and discharge programs, they are not accessible to private borrowers. When it comes to such loans, it is advisable to take advantage of debt refinancing. In general, borrowers need to get a new loan to cover all their existing debt through the refinancing process. The refinancing company will do all these steps once the debtor agrees on the terms.
One can be unclear about the refinancing process. After all, they can question how getting a new loan can solve the problem. The answer is simple. A new loan will usually have a lower interest or monthly payments than the total repayment amount of all existing loans per month. In this way, the borrower will save money and meet the obligations if previously he/she struggled with high payments. Besides, refinancing is a fast solution. For example, application to forgiveness programs can take several years; even reviewing the case requires several months. However, refinancing can be completed in a few months. Refinancing also makes debt management simple because instead of multiple payments, the borrower will deal with a single loan. Lastly, borrowers’ credit ratings can be increased as they pay off previous obligations.
Each Navient lawsuit update reminds borrowers that they should fully understand their options and apply if required. Refinancing is one of the best options to ease the debt repayment process, especially for private student loan borrowers. Its eligibility criteria are also simple. A debtor needs to meet only two, in some cases three, conditions:
- Stable income
- High credit score
- Cosigner (optional)
First, you will need a stable income source to prove that you can pay for your new obligations. A high credit score- more than 600 is desirable- is also needed to hedge against the non-payment risk. Some refinancing companies might require a cosigner as additional protection from non-payment risk. If the debtor fails to pay the debt, the cosigner will be obliged to meet the obligations. Keep in mind that the cosigner should also meet stable income and high credit score requirements.
How to Decide on Refinancing Service?
Like other debt relief and management options, refinancing services have their right time for the application to bring maximum benefits. Sure, if a private borrower struggles with the debt repayment and is eligible for refinancing, it is his/her best to act as fast as possible. The main reason for such swift action is that there is almost no other useful option for private borrowers. However, federal loan borrowers have access to multiple programs. Hence, they need to think twice before refinancing their loans. There might be more effective programs like forgiveness that relieve the debt.
Yet, in general, there are some signs that it is the best time for refinancing. Private debtors who have variable interest loans can take advantage of this program when the interest rates rise. By refinancing, it is possible to move the debt to a fixed-rate loan, saving some money for the debtors. Besides, if the debtor applied before and was rejected due to ineligibility, he/she can reapply once his/her qualifications improve. Keep in mind that one can utilize the refinancing strategy multiple times.
There exist hundreds of refinancing companies. Some of the most popular service providers are Citizens Bank, College Ave, Laurel Road, Commonbond, SoFi, etc. When choosing a refinancing service provider, it is better to do thorough research not to face issues like those mentioned in each Navient lawsuit update. In general, having a lower interest is desirable to save money each month. Some service providers also grant bonuses for referral or sign-up. Sure, bonuses are catchy, but if a debtor should choose between a bonus opportunity and a lower interest, the latter should always win. Companies can also deliver other benefits such as consigner release, flexible payment periods, zero origination fees, etc. You can get more information on our blog about the best student loan refinancing companies.
1. Debt Consolidation
Debt consolidation is similar to refinancing as it also involves combining all loans into a new loan. In this way, the debt repayment process becomes easier. Borrowers do not struggle with different payment dates and amounts or do not forget about the deadline. Debt consolidation is available to both private and federal borrowers. Private borrowers can utilize this strategy through a private lender, while others can access a federal debt consolidation program.
By consolidating, one can be eligible to lower monthly payments because consolidation usually prolongs the debt repayment process. For example, instead of 15 years, you might be required to fully repay the debt in 25 years. Sure, borrowers who want to get rid of the debt fast should not choose this option. However, if you are struggling to make ends meet every month, consolidation can be a great opportunity.
Besides, it is possible to transfer variable-rate loans into fixed-rate ones through debt consolidation. It also requires a move to Income-driven repayment plans, which will be an excellent solution for low-income borrowers. Income-driven plans to base the monthly payments to income level means you can even qualify for the lowest amounts.
2. Repayment Plans
While reviewing each Navient lawsuit update in 2020, it was noticeable that one of the common claims was misdirection. It was alleged that Navient did not direct people to Income-driven plans and instead recommended forbearance. But why Income-driven repayment is more desirable for borrowers?
Income-driven repayment base monthly due to amounts to revenue level. People who earn high salaries can be required to pay high amounts, and vice versa. Different income-driven plans exist, including Pay as You Earn, Revised Pay as You Earn, Income-Contingent plan, and Income-based repayment. Each of these alternatives requires various payment rates and payback period. For instance, Revised Pay as You Earn requires 10% of discretionary income, divided by 12, per month. Its repayment period is 20 years for undergraduate students and 25 for graduate borrowers. Meanwhile, the Income-Contingent plan usually takes 25 years to repay, and the amount is either 20% or the rate required when making fixed payments for 12 years.
Before deciding on a plan, borrowers should review the eligibility criteria and its terms to make the best decision. You can check different repayment plans on the official website or in Student Loans Resolved blogs.
3. Forgiveness Programs
It is not surprising that the forgiveness programs, particularly the Public Service Loan Forgiveness, were in the center of the claims in the Navient lawsuit update with the American Federation of Teachers. Forgiveness programs are the best opportunities created for federal borrowers. They allow borrowers to eliminate the debt fully or partially with different conditions. For example, the PSLF requires making 120 qualifying payments. Once the borrower is done with this condition, his/her whole remaining debt will be forgiven.
Another program, Borrowers Defense to Repayment, can eliminate the debt if the borrower faces any education or debt-related mismanagement from the school. If the borrower can prove cases like false advertisements or lie about the true cost of education with debt, they will get a debt reduction. This reduction can be partial or full. In short, if you have a federal loan, get detailed information about top forgiveness programs. Unfortunately, such forgiveness options are not available to private borrowers.
4. Discharge programs
Discharge programs can be confused with forgiveness plans. While both of them can dismiss the debt, they are granted for different reasons. Usually, forgiveness programs benefit borrowers in return for service or other mandatory action. However, discharge happens in special cases, like disability, death, school closure, etc. Mostly, discharge programs are available to federal borrowers. Only a few private lenders can provide this benefit. For example, Sallie Mae can forgive the debt if the borrower dies or becomes disabled due to military service.
5. Negotiating with the Lenders
Another available option for private debtors can be negotiating with the lenders. If they start experiencing financial difficulties, they can ask their credits, what are the possible assistance options. However, keep in mind that the lenders are not obliged to make the repayment process easier if it is not stated in the loan agreement. All a borrower can do is negotiating to get some favorable terms for a temporary period. Debtors can explain the difficulties they face and indicate that they have done anything to meet the obligations without the lender’s assistance. In some cases, creditors can agree to make favors because they would not want the borrower to default. When defaulted, the debt collection process becomes tough and involves more costs for the lender. Hence, to avoid such a case, they can lower due amounts for a short period or enroll the debtor into forbearance status.
Navient is one of the biggest loan servicers in the U.S by serving more than 12 million borrowers. However, unfortunately, keeping all parties satisfied is a tough task. Hence, Navient frequently faces lawsuits from different organizations, like the Consumer Financial Protection Bureau or the American Federation of Teachers. Each Navient lawsuit update mentioned in this guide is a good reminder that borrowers should be aware of their debt conditions and progress. Relying on a loan servicer to manage all debt-related issues can be a mistake. If a borrower struggles with debt repayment, he/she should explore all options and, in some cases, get help from financial advisors. In Student Loans Resolved, we have a team of debt management experts who can analyze the conditions debtors face and make the best recommendations to reduce or eliminate the debt.