If you’re one of the 44 million borrowers in the U.S. paying off student loans, listen up.
The U.S. Consumer Financial Protection Bureau is suing student loan servicer Navient Corp., and this news might affect you in a big way.
The CFPB claims Navient “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.”
The CFPB is seeking to recover “significant relief” for borrowers who may have overpaid as a result.
If you’re confused (like we were!) about how your loans ended up in the hands of Navient, here’s the deal:
In 2014, Sallie Mae, the original student loan servicing giant, split to become Sallie Mae and Navient. While Sallie Mae moved toward becoming a consumer banking business, Navient was launched specifically to take over the management and servicing of federal (and some private) student loans.
Does This Lawsuit Affect Me?
Who exactly will qualify for compensation in this lawsuit?
That remains to be seen, but the preliminary statement from CFPB Director Richard Cordray explains that many troubled borrowers were guided into forbearance, rather than income-based repayment plans. (Forbearance is an easier, and as a result, cheaper option for loan servicers to implement than income-based repayment plans; learn more about these options in our handy-dandy guide to student loans.)
While Navient may have saved some money in operating costs, Cordray explains, the real benefit to the company came through the nearly $4 billion in extra interest on these loans that allegedly accrued over a period of about five years.
While many affected borrowers reached out to Navient during this time, the suit says that the company was negligent in helping borrowers understand their options and instead extended the length of forbearances.
For those who were able to enroll in income-based repayment plans, Navient failed to appropriately notify borrowers of various deadlines that could have allowed them to maintain lower payments, a lower principal balance, and benefits like interest subsidies and any progress previously made toward loan forgiveness.
And as if we’re not all fed up enough at this point, CFPB alleges that Navient misreported loan forgiveness for borrowers (including veterans!) under the Total and Permanent Disability program by using reporting codes meant for cases of default. That means many disabled borrowers could also be dealing with damaged credit, which can seriously hurt their chances of buying a house or car, or even renting an apartment.
The bottom line here is that the lawsuit alleges Navient grossly disserviced its borrowers by neglecting to help them understand their options and taking the easy way out in numerous avoidable situations at the expense of its already struggling borrowers.
So uncool, Navient.
Here’s What You Can Do if You Have a Navient Student Loan
The lawsuit is still in the early stages, so check back for details on who will be affected as the story unfolds.
In the meantime, there are a number of steps you can take to ensure that you will have the best chance of recouping your losses.
Check Your Credit Report
Get a copy of your credit report, and check it for errors relating to your student loans. If you think you’ve been unfairly penalized, here’s how to report the errors and go about having them removed.
Understand All Your Repayment Options
Take a few minutes to make sure you fully understand your options — knowledge is power, and power is the ability to push back when your loan servicer tries to coerce you into a situation you don’t feel comfortable with.
Put It in Writing
If you think you are one of the borrowers affected by Navient’s shady dealings, file a complaint with the CFPB, the U.S. Department of Education or directly with Navient (although legend has it the company is terrible at following up on complaints… shocker). We’re not sure yet what the process will be for repayment to the borrowers, but it couldn’t hurt to get it in writing so when the time comes, you have proof of your situation.
Your Turn: Have you ever felt cheated by your student loan servicer?
Grace Schweizer is a junior writer at The Penny Hoarder.