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Navient’s Claimed $22.3 Million Obligation to Government: What You Need to Know

navient student loan forgiveness

Navient is a large loan servicer, managing more than $300 billion worth of federal student loan debt. Unfortunately, the company faces claims from time to time. One of these claims was that the Education Department overpaid Navient by around $22.3 million. Since the beginning of the 2000s, the company was requested to refund the overpaid amount. However, it did not admit any wrongdoing.

Previously, Sen. Elizabeth Warren raised attention to Navient and requested the company to repay the money. Recently, acting secretary Mitchell Zais ordered Navient to refund the amount again. This guide will discuss the evolution of the problem and how the Navient refund connects to student loans.

What Happened?

Dr. Mitchell Zais was assigned acting secretary of the Education Department when Betsy DeVos resigned on January 8th, 2021. 

Later, when it was time to leave the office, Mitchel Zais ordered one of the biggest student loan companies of the U.S- Navient- to pay back $22.3 million. Zais alleged that Navient owed this money to the Education Department because Navient overcharged the organization.

The Origin of Problem- 9.5% Return Guaranteed

The history of the Navient issue dates back to the ’80s. At that time, the government guaranteed some lenders a 9.5% return. Mostly, tax-exempt bonds qualified for this guarantee. Sure, when the interest rates fell, the lenders enjoyed the gains. Although market interest rates were decreasing, as the government secured a 9.5% return, the lenders faced no challenges. In contrast, they received benefits due to government support.

Subsequently, the 9.5% return guarantee was eliminated by Congress. However, lenders did not wish to lose the privilege of having such support. Hence, they created new loan packages but added old loans with a return guarantee to continue getting benefits. 

However, events started to uncover when a whistleblower informed the officials about this ‘fraud’ of lenders. When Barack Obama became president, he ordered to distribute only direct loans by eliminating other parties in between. Yet, there were millions of borrowers, and to manage such a vast portfolio, the administration needed other loan companies such as Navient and Nelnet.

In the early 2000s, the department’s inspector noticed the claimed fraud, and later in 2006, it was concluded that Nelnet was overpaid. Finally, in 2013, the Navient was recommended to refund the $22.3 million. However, the student loan company did not accept any wrongdoing and continued to fight the claims. 

How did the Parties Respond?

Although Zais, who was acting secretary after Betsy DeVos left, ordered Navient to refund the money, parties- Navient and the government did not fully respond to it. 

Only the spokesperson of the loan servicing company, Paul Hartwick, mentioned that they are evaluating the issue and options. In his email, Hartwick noted that the company officials are disappointed with the decision, and they believe their practices complied with the Education Department’s guidance. 

Elizabeth Warren’s View on the Events

Senator Elizabeth Warren has been a supporter of the idea of refunding. Warren criticized the Education Department as it relied on other companies, like Navient, to operate. Even when Betsy DeVos was still in charge, she urged her to make Navient refund the money. 

As a response to Mitchell Zais’s order, she noted that it is a good beginning making the loan company pay the money. She added that instead of solving the issue, Navient delayed the payment for more than six years. However, she also wanted the Education Department to stop working with Navient as a contractor. She mentioned that it is time to eliminate Navient as it is scamming students and taxpayers.  

When making claims, Warren relied on the Office of the Inspector General’s audit, dated 2009. In that audit report, the inspector noted Navient got allowances for students who did not qualify for loans. Therefore, the Education Department overcharged Navient by around $22.3 million. 

In short, Navient’s billing practices were claimed to be faulty, and the inspector suggested the Federal Student Aid get money back from the loan company. As mentioned before, Navient spokesman noted the company practices were compliant with the Education Department’s guidance. So, Navient has never accepted wrongdoing.

Previous Issues with Navient

Although Navient serves more than 6 million borrowers, the immense size of processes brings its challenges, too. Navient faced some allegations before due to claimed incorrect operations. In the 2017 Navient lawsuit, the Consumer Financial Protection Bureau started a case by claiming that Navient misled the borrowers.

There were allegations regarding processing payments inaccurately, providing outdated information, hurting borrowers’ credit performance, etc. However, again, Navient did not accept any wrongdoing.

What Should Borrowers Do?

As mentioned before, Navient serves more than 6 million student loan borrowers. If you are one of them, you might wonder how the refund claims relate to the debtors. Refund does not bring direct benefits, but there are some points that student loan borrowers should know to protect themselves from loan servicing scams and incorrect operations.

1. Get Familiar with Your Options

Loan servicers can provide correct information and show the right direction to the borrowers. However, it is for the best if the borrower is well aware of the options and is capable of evaluating the proposed actions. Otherwise, it would not benefit from complaining that the loan servicer did not mention the better program or missed to inform about the opportunities to eliminate the debt. 

Do not forget that you owe the debt, and it should be one of your responsibilities to get familiar with the debt repayment and cancellation programs. You can check official websites, read our articles, or get help from third-party debt experts like those in Student Loans Resolved. Read about repayment plans, loan forgiveness programs, consolidation, and refinancing options. This is a great way to protect the borrower from student loan company scams and stay updated. 

2. Keep Records

Student loan debt requires a considerable commitment. Besides making payments on time, borrowers should collect the records. Any document related to the debt and repayment should be kept organized. In this way, if problems arise, the borrower can use documents as evidence to support their claims. When contacting the loan servicer, it is advisable to choose a written channel because it allows documenting the communication for future use. 

3. Raise a Voice

If a borrower faces misconduct or gets misled, he/she needs to act promptly. Sure, debtors cannot utilize federal debt elimination programs such as Borrower’s Defense to Repayment in case the loan servicer engages in fraudulent activities. 

However, the borrower can sue the lender or get help from third-party organizations to raise the voice. For example, the Department of Education, Consumer Financial Protection Bureau, the direct lender, etc., can be interested in your claims.