Popular Student Loan Servicer Faces Lawsuit

The Financial Aid office at WSU.

What Students Need to Know

By Ryan Mercier

The Financial Aid office at WSU.

Navient, one of the largest loan servicers in the nation, was sued mid-January by the Consumer Financial Protection Bureau, for allegedly cheating customers through deceptive practices that could have driven up overall costs for student loan borrowers. This lawsuit could affect a great number of students who take out loans through federal student aid, including students at Worcester State University, though the number of WSU students actually impacted is unknown.

The lawsuit alleges that the company systematically deterred borrowers from accessing appropriate repayment plans and failed to disclose annual deadlines for those who did enroll in repayment plans, preventing “some of the most financially vulnerable borrowers from securing some or all of the benefits of plans that were intended to ease the burden of unaffordable student debt,” according to court documents. The lawsuit also claims that Navient misreported information to consumer reporting agencies about borrowers, thereby damaging their credit and making it almost impossible to relieve a loan of its cosigner.

In addition, the lawsuit alleges that Pioneer, a debt collector that has worked closely with the U.S. Department of Education, mislead consumers about the effects of rehabilitation on consumers’ credits reports and overstated the amount of collection fees that would be forgiven by enrolling in the company’s rehabilitation program. A rehabilitation program is supposed to be used by borrowers who have defaulted on their loans and wish to make smaller monthly payments to rebuild their credit.

As a loan servicer, Navient’s primary responsibilities are to process loan payments and to communicate with loan borrowers about the repayment of their loans, including helping them choose which repayment plan best fits their economic needs. Navient handles more than 12 million customers, accounting for over $300 billion of the $1.4 trillion dollars in overall student loan debt. About 6 million of these customers are serviced through Navient because of their federal student loans, which are leant by the U.S. Department of Education and then serviced by a number of different companies.

The Consumer Financial Protection Bureau (CFPB) has been aware of illegal actions by “one or more” student loan servicers since October 2014, claims this CFPB Supervision Report. However, the first investigation into Navient didn’t begin until April of 2015 after new allegations of wrongdoing and a tremendous spike in consumer complaints to the CFPB. It was not until January 18 of this year that a formal lawsuit was filed.

Navient has since come out with a written statement claiming that the lawsuit is unfounded and politically motivated, and that they will “vigorously defend against these false allegations.” The written statement also claims that “federal borrowers serviced by Navient are 31 percent less likely to default than their peers at other servicers.”

Unfortunately, there is no way of telling how many students at Worcester State University could be affected by Navient’s alleged wrongdoing, as there are many loan servicers used by the federal Department of Education. Ever since the government began lending money directly to students, a practice known as direct lending, schools have no say in which specific loan servicers they work with.

“Since direct lending went into effect [Worcester State University is] at the mercy of the federal government,” said Jayne McGinn, Worcester State’s Financial Aid director.  “Prior to direct lending, schools were able to choose the lenders they worked with based on their customer service and the servicer the lender used.”

McGinn said she was surprised by the allegations, and that “[she has] always had faith in the loan services the feds choose to work with.” She also said that Worcester State has not yet had any complaints about loan servicers.

Jayne McGinn began her career in the private student loan sector, and has since worked with students in the financial aid departments at public universities including UMASS Medical School and now at Worcester State University. Her advice to students is to remain diligent when dealing with student loans and to understand all their options.

“Students should take their time to review their loans and understand their repayment options,” McGinn said. “There is no one ‘best’ repayment option for everyone.”

The standard repayment schedule is over a ten-year period with a minimum monthly payment of $50, but there are other repayment options that students may be eligible for based on their income.

While Worcester State does not have any particular programs to help students navigate their loan repayment options, McGinn says, “a student is always welcome to make an appointment with their financial aid counselor if they have any questions about financial aid.” Students who take out federal student loans at Worcester State University are required to complete entrance counseling to learn about their student loans prior to disbursement of their first loan, and it is recommended they complete exit counseling when they graduate, withdraw or take a leave of absence. More details about entrance and exit counseling can be found at www.studentloans.gov, which is also great resource for information about loan repayment options, deferment and forbearance.

McGinn also suggests visiting the National Student Loan Data System (NSLDS), the central database for federal student loans, where students can review the status of all their federal loans including repayment status and loan servicer information. This information can be found at www.nslds.gov.

If a borrower has any problems with their student loans, or if they believe that they have been affected by Navient or any other loan servicer, they are encouraged to contact the local Student Loan Ombudsman Office. The Student Loan Ombudsman Group is a neutral and confidential resource helping to resolve disputes related to federal student loas. A student can also call their lender or servicer directly, or file a complaint with the CFPB. It is important to remember that, as of now, the lawsuit is not a class-action suit that people can sign up for.

For now, the Federal Department of Education has temporarily stopped its contract with Navient and the company will not be servicing any new federal student loans, at least until the lawsuit has been settled.


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