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Navient Lawsuit Updates: A Look Back at 2021 and Expectations from 2022

Navient Lawsuit Update

If you have federal student loans, you likely know Navient. Navient is a part of Sallie Mae, which deals with federal student loan accounts. Currently, the company deals with six million federal loan borrowers, but soon it will quit its position as a loan servicer. Instead, Maximus can be the new loan servicer if the Education Department and Federal Student Aid approves this transfer. 

Unfortunately, even during the effective service of Navient, the loan servicer faced many lawsuits. Considering the volume of its operations, it is not surprising that Navient lawsuit updates appear in the news frequently. This guide summarizes the updates of 2021 and presents some insights into the Navient lawsuit 2022. 

Navient is Quitting its Federal Services

A major update regarding Navient during 2021 was that the company decided to quit its responsibilities as a federal loan servicer. In September, the loan servicer announced that it is working with the Education Department to transfer the loan servicer operations to another company, called Maximus. Maximus has already signed an agreement with Navient and accepted the transfer of student loan accounts. However, they submitted a preliminary request for change which needs to be reviewed and approved by the Education Department and Federal Student Aid. Only after getting all approvals, Navient can exit its position.

Yet, it was welcome news for Sen. Elizabeth Warren, who accused the company several times due to the Navient lawsuits. She told Insider that the federal loan program would be much better without Navient’s services.

What will be the Impact of Navient’s Exit?

The news on Navient was not completely surprising as two other loan servicers- FedLoan Servicing and Granite State Management and Resources- have already announced their exit. Yet, there will be a major shakeup for student loan borrowers and the ED because of the volume of changes. The accounts of around six million borrowers will be transferred. It takes a lot of time and effort to transfer operations to a new company. Considering that debt collection will resume for every federal borrower in 2022, such a massive collection period can be even more problematic with the new, less experienced loan servicers. 

However, there also exists a convenience for borrowers whom Navient serves. Navient has already started negotiations with Maximus, which has enough experience in dealing with defaulted federal loans. Hence, the transition process can be much easier for such borrowers.

Navient Lawsuit Updates (2021)

One of the significant lawsuit updates is on the case of the Washington Attorney General’s (Bob Ferguson) claims against Navient. This lawsuit started in 2017 and claimed that Navient engaged in deceptive, misleading, and fraudulent activities. In many cases, the loan servicer wrongfully stimulated borrowers to get loan forbearance. As a result, financially struggling borrowers found themselves in a more profound debt burden due to accrued interest payments. 

Subprime Loans

The lawsuit accused Navient of distributing subprime loans. Navient financed students who had less than 50% chance of graduation. Hence, these people would not be able to repay the debt. However, allegedly, Navient still granted loans to gain access to more profitable loan volume

Forbearance

navient lawsuit update

Financially struggling borrowers are usually advised to enroll in a new repayment plan. Specifically, an Income-driven repayment plan is the most useful if the borrower wants to get the most affordable payment rates. However, the lawsuit alleged that Navient misguided borrowers, and instead of directing them to a proper repayment plan, they advised getting forbearance. As a result, borrowers got interest payments accrued, which increased their debt obligation further.

Low-Quality Service

Another claim against Navient was that the loan servicer could not deal with the payments appropriately. For example, it failed to apply for payment correctly or follow the instructions of borrowers. Besides, allegedly, when the loan servicer called borrowers for late payments, it requested more money than required.

Co-Signer Challenges

Navient offered borrowers a co-signer release benefit. This benefit allows borrowers to eliminate a co-signer after making several payments. However, allegedly, Navient did not release the borrowers on time and created barriers for the release.

The Decision- May 2021

The result of this lawsuit can be one of the most important Navient lawsuit updates. Finally, in May 2021, the judge ruled that Navient conducted unfair practices and went against many consumer rights. The thing that makes this Navient lawsuit 2021 unique is that it’s the first time the judge has decided that Navient broke the law. Since 2017, the Attorney General of Washington has been seeking justice so that Navient can be taken accountable for the borrower’s challenges. Besides, the AG wanted to get financial compensation for the borrowers. 

Navient’s Statement to Ruling: Navient noted that they are highly disappointed with the ruling, and they explained that the confusion on co-signer release was due to technical matters. 

What to Expect in 2022?

However, the issue is still not resolved entirely. The judge recognized that Navient violated rights regarding co-signer release. Yet, other issues against Navient still need to be clarified. Hence, we can expect Navient lawsuit updates on this case (Washington AG vs. Navient) next year. In addition, the judge has already scheduled another trial for all claims to April 18, 2022. Therefore, Navient lawsuit 2022 will involve this case with Washington AG. 

New Jersey Lawsuit (October 2020)

Navient lawsuit updates are generally about the case brought forward by Washington AG. Unfortunately, there is no update regarding another lawsuit, which New Jersey Attorney General Grewal brought forward. This lawsuit also has similar allegations to what we explained above. Generally, the AG claimed that the loan servicer only pursued its profitability and failed to help borrowers. 

Misguiding Borrowers

Similar to the Washington case, this lawsuit also claimed that the loan servicer failed to guide the borrowers properly. Instead of enrolling struggling borrowers in Income-driven repayment plans, the loan servicer advised forbearance. As explained, loan forbearance allows borrowers to suspend the collection. However, during this period, interest can continue to accrue and then capitalize on the principal balance. As a result, monthly payments after forbearance might increase. 

Failing to Keep Communication

Besides, the lawsuit claims included a failure to maintain communication with the borrowers. Generally, loan servicers should notify borrowers about essential deadlines. One of these deadlines is for recertifying income for Income-driven repayment plans. If borrowers do not recertify on time, they can lose their eligibility for repayment options. Allegedly, the loan servicer did not inform all borrowers, and some missed the deadline. 

Co-signer Release

This lawsuit involved the difficulty in releasing co-signer. Allegedly, Navient made loans attractive by offering co-signer release, but it created barriers when it was the time to release the co-signer. 

Navient’s Statement on New Jersey AG lawsuit: The loan servicer explained that they are providing excellent service to borrowers. Besides, they led borrowers to better enrollment plans, as opposed to allegations. Half of their loan portfolio is enrolled in an Income-driven repayment plan.

What to Expect in 2022?

This lawsuit started in October 2020. Already a year has passed, but still, Navient lawsuit updates do not cover this case. It is understandable, as lawsuits take a lot of time to progress. It can be expected that next year, there will be updates. Similar to Washington AG vs. Navient, the lawsuit can resolve some of the claims. 

However, the co-signer release issue is the most likely option to get resolved first. Such a difference is due to a ruling (based on Washington AG vs. Navient) against Navient. As explained in the previous case, the judge ruled that Navient broke the law regarding co-signer release. Yet, it can take a few years until more Navient lawsuit updates on New Jersey AG vs. Navient for all claims appear. 

Navient Sues Education Department

The cause behind this lawsuit goes back to 2009. At that time, the Education Department’s inspector was checking Sallie Mae’s operations. Inspector found out that the loan servicer overcharged the Education Department. Only after a decade, the Education Department decide to ask Navient to return the money.

The amount of overcharge is $22.3, and it is Navient’s issue now as Sallie Mae directed its federal operations to Navient. Sen. Warren has long been accusing Navient and demanding the return of money but only after Mitchell Zais, the lawsuit start. 

Yet, Navient challenges this decision as the loan servicer is suing the Education Department. The lawsuit started in May 2021. Navient wants to block the payment of $22.3 million. Besides, it aims to get all attorney fees covered by the Education Department. Unfortunately, there are still no Navient lawsuit updates regarding this case. 

Consumer Financial Protection Bureau vs. Navient

CFPB is also one of the parties which sued Navient. The lawsuit against Navient started in 2017 on the grounds that Navient did not give fair chances to borrowers. Besides, allegedly, Navient cut costs from operations by misleading debtors. The other claims of this lawsuit are similar to previously discussed cases. 

Failing to Process Payments

Loan servicers are obliged to apply for payments as they are intermediaries among borrowers and the Education Department. However, CFPB claimed that Navient’s employees failed to apply for settlement and misallocated them several times. As a result, borrowers’ instructions were not followed, and debtors only realized the issue after a few months.

Failing to Guide Borrowers

Similar to other cases, CFPB claimed that Navient misguided the borrowers. For example, while enrolling in an Income-driven repayment plan was a better decision, the loan servicer advised borrowers to get loan forbearance. As a result, instead of saving money, borrowers ended up paying more than their original obligations.

Hurting Credit Performance

What makes this lawsuit different from others is that it also involved a claim regarding credit histories. The CFPB claimed that the loan servicer did not maintain proper communication with the credit rating agencies. When borrowers qualify for forgiveness programs, like Disability Discharge, they do not need to make monthly payments. However, allegedly, as Navient misinformed agencies, it seemed like borrowers did not pay their monthly obligations. As a result, some borrowers’ credit scores decreased.

Other Claims

Other claims in this lawsuit are also similar to the cases mentioned above. Hence, we will not go over each issue all over again. In a nutshell, further claims included failing to inform about recertification and creating barriers for the co-signer release. 

Updates

It is almost five years since the lawsuit started, but it still has no significant Navient lawsuit updates. In June 2020, Navient filed a summary judgment request. They wanted to end this lawsuit as there was no progress. Navient claimed that CFPB had no evidence to back up their allegations. 

Even after analyzing terabytes of data, CFPB could not find any valuable support. As there was no Navient lawsuit in 2021 for this case, we can expect that this lawsuit will resolve in 2022. 

What You Should Know About Lawsuits…

Navient lawsuit updates might not apply to your student debt. However, these lawsuits are necessary as they remind borrowers of their rights regarding student loans. Borrowers need to understand their loan terms completely. Besides, you need to check your debt relief options like forgiveness programs. To avoid future problems, you need to get familiar with your choices or receive financial advisory help. 

Loan servicers should guide borrowers. However, as visible from Navient lawsuit updates, they can fail to provide accurate information. In this case, it can be a waste of time and money to expect great results from loan servicers’ recommendations. Instead, it can be more effective to get help from third-party debt specialists. Like those in Student Loan Resolved, debt experts can analyze your finances and advise the most suitable debt resolution strategy. 

Document Evidence

navient lawsuit update - file complaint

When you communicate with the loan servicers, it can be a good idea to prefer written communication. Such a method allows you to prove your claims if a problem occurs in the future. Besides, take your debt obligations seriously. Make sure to read all details regarding the student loan and double-check your payments after you make them. As mentioned in Navient lawsuit updates, loan servicers might apply for the payments incorrectly. 

Please, do not ignore any issue regarding your debt obligations, as ignorance can quickly lead to troubles. 

Do not Hesitate to File Your Complaints

Additionally, there exist several organizations protecting debtors’ rights. Hence, if you face any fraudulent and unfair action, you can communicate your problems to these parties. For example, you can contact the Education Department, Consumer Financial Protection Bureau, Federal Trade Commission, etc. Finally, as visible from several Navient lawsuit updates, you can also ask the State Attorney General for help.

What are My Options for Debt Resolution?

Once again, Navient lawsuit updates remind borrowers that it is better to get rid of the debt as soon as possible. But, unfortunately, you cannot even trust the loan servicers fully on how to deal with the debt struggles. 

When it comes to eliminating debt challenges fully or partially, you have multiple options. Some of these solutions are:

  • Debt Forgiveness
  • Discharge Programs
  • Repayment Plans
  • Debt Consolidation
  • Debt Refinancing 
  • Negotiating with the Lenders

 

Debt Forgiveness Programs

If you have federal student loans, you can qualify for student loan forgiveness programs. These programs can eliminate your debt fully or partially. For example, the Public Service Loan Forgiveness program can cancel 100% of the remaining debt once you make 120 qualifying payments. However, as 120 payments are required, it takes at least ten years to qualify for forgiveness. 

This program is also one of the causes of the Navient lawsuit updates we discussed above. Some parties alleged that Navient failed to inform borrowers about the possibility of this option. Hence, borrowers missed such an excellent opportunity to get rid of the debt. 

Besides Public Service Loan Forgiveness, there exist several other programs to cancel your debt. For instance, Borrowers’ Defense to Repayment could eliminate your debt if your school misled you. Therefore, if the school officers lied about job replacement rates, quality of education, or cost of enrollment, you could apply to this program. 

You can also consider Teacher Loan Forgiveness or Perkins Loan Cancellation. Keep in mind that if you enroll in Income-driven repayment plans, you can get forgiveness once your payment period completes. So, you can get total forgiveness in 20-25 years.

Discharge Programs

Discharge options are also similar to forgiveness programs. They can help borrowers get rid of the student debt. However, these programs are hard to qualify for. You cannot get qualified only by repaying your debt. There should exist additional external factors. 

For example, if your school closes, you can apply for Closed School Discharge. Plus, borrowers with total and permanent disabilities can qualify for Disability Discharge. There also exist discharges due to bankruptcy, death, false certification, etc. 

Repayment Plans

Federal loan borrowers are lucky regarding repayment options. The Education Department provides multiple repayment plans to borrowers to ease the payback period. For example, if you have financial challenges, you can enroll in Income-driven repayment plans. 

Such a solution is better than getting loan forbearance, as explained in multiple Navient lawsuit updates. You can also find repayment plans that can help you to pay off the debt fast. If you are unsure which option is the most suitable for your finances, you can get help from Student Loans Resolved debt specialists. 

Debt Consolidation

Loan consolidation does not eliminate your debt. In most cases, you would not save money from consolidation. However, you can ease and simplify the repayment process with this strategy. Consolidation allows borrowers to combine multiple loans into one. As a result, you only deal with one loan repayment. Your new interest rate will not help you save money as it is a weighted average of existing rates. Yet, you can get lower monthly payments if your repayment period is more extended after consolidation. 

Debt Refinancing

All the solutions mentioned above are available to federal loan borrowers. But, unfortunately, private debtors are not as lucky as federal borrowers when it comes to debt repayment/resolution strategies. 

Yet, one of the best solutions, available both to federal and private student loan borrowers, is loan refinancing. Refinancing is similar to consolidation, as you get a new loan and pay off your existing loans. However, the difference is that you can save money if your new interest rate is lower than before. 

1. Advantages of Refinancing

Loan refinancing might not make sense if you want to get rid of the debt. However, student debt refinancing has multiple benefits if you utilize it properly. First, you might want to change your loan servicer. As Navient lawsuit updates indicated, loan servicers can be ineffective or pressuring. In such cases, you might want to change your loan servicer. When you get a new refinancing loan, you also get a new lender. As you pay off student loans, you do not need to contact the previous loan servicers again. 

If the market interest rates are declining, it will not have any impact on your fixed-rate loans. However, if you refinance, you will get a new rate. Additionally, you can find a lower rate if your credit score increases. When you receive student loans, you do not have an employment history or stable income. However, over time, you can improve your credibility, which will grant you better interest rates. Hence, refinancing can be a good idea. 

2. Drawbacks of Refinancing

If you have federal student loans, refinancing might bring some disadvantages. As mentioned in Navient lawsuit updates, financially struggling borrowers are better off if they enroll in Income-driven repayment plans. If you refinance a student loan, you will not enroll in federal repayment programs anymore. Besides, other federal benefits, including forgiveness, discharge programs, or forbearance options, will not be available to you. 

Negotiating with Lenders

negotioating with the lender

It might be a case that none of the solutions mentioned above will be accessible to private loan borrowers. Unfortunately, in such a situation, only contacting the lenders can be helpful. However, if you immediately inform lenders about your financial struggles, lenders can find ways to help you. Sure, the solutions will not be as attractive as forgiveness programs or affordable repayment plans. However, you can at least know your options to deal with debt struggles. 

Final Words

Navient is one of the biggest loan servicers for now, as it is leaving its position as a federal loan servicing company. Instead, its federal loan accounts will be transferred to Maximus if the FSA and the ED approve this decision.

Unfortunately, during the effective service of Navient, the loan servicer faced multiple allegations. This guide discussed the Navient lawsuit updates for 2021 and presented some expectations for 2022. Although the company is quitting loan servicing responsibilities, it will probably stay in the news headlines for a long time due to ongoing student loan lawsuits.