America's Largest Student Loan Company Is Being Sued By The Government

Owen Stevens
January 20, 2017

So for quite a number of private student loan companies, they actually allow the borrower to apply to have their cosigner be released from the loan after making a certain number of on-time payments or other requirements.

In a period of about five years ending in March 2015, the CFPB claims, "Navient enrolled over 1.5 million borrowers in two or more consecutive forbearances totaling twelve months or longer".

The actions against Navient come after years of complaints from borrower advocates, lawmakers and the CFPB over the way student loan servicers in general - and specifically Navient - treat borrowers. Altogether, the company services the student loans of more than 12 million borrowers, roughly half of whom are under a contract with the U.S. Department of Education. Both the CFPB and IL filed similar lawsuits on Wednesday.

Navient flatly denied most of allegations in a statement, saying the lawsuit reflects the bureau's "political motivations", but a representative for the company wouldn't respond to repeated questions from Mic about the CFPB's claims regarding veterans. "The benefit of having the federal agency is to be able to protect all borrowers", she said. "Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems".

Now Navient is the focus of a federal lawsuit for allegedly cheating its customers out of their repayment rights. By doing so, Navient potentially added $4 billion to its own coffers in the form of additional interest charges.

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Allegations by US financial regulators that Navient, the nation's largest student loan servicing company, misapplied payments and steered graduates into higher-cost repayment plans, underscores the complexity - and risks - of paying off college debt.

The lawsuit asks the court to order Navient to stop these deceptive practices, and reform its loan servicing and collection practices to the extent it has not already done so during the course of our investigation.

Illinois Attorney General Lisa Madigan is suing some of the largest names in the student loan industry. "The regulator-asserted standards are inconsistent with Department of Education regulations, and will harm student loan borrowers, including through higher defaults". As a result, engaging in lengthy and detailed conversations with borrowers about their particular financial situation and trying to determine the income-driven repayment plan that is most appropriate for each borrower would have been financially detrimental for those employees.

"They also have to be responsive to the real economic anxiety that's out there, especially among student loan borrowers", Chopra pointed out. And in October, a federal appeals court ruled that its structure is unconstitutional because it gives too much power to a single agency director.

Other reports by MyHealthBowl

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