Navient is one of the nation’s largest federal student loan servicers. If you have federal student loans, there’s a good chance that Navient may be your servicer.
Since 2017, Navient has been mired in a growing number of lawsuits, including suits from the Consumer Financial Protection Bureau (CFPB), several state attorney generals and a group of teachers.
As of July 2020, a final settlement for the Navient lawsuit has been reached, which will cover Navient borrowers who believe that they were misled by the servicer. Essentially, Navient has to improve staff training on PSLF and donate a small amount to a student loan counseling non profit group.
The only money coming out of the settlement is for the lawyers representing the class. Borrowers will receive no monetary damages.
We’ll explain what the conclusion of the Navient lawsuit means for you.
Navient lawsuit: A brief history
Let’s take a look at why legal action against Navient began and how it got to the point it’s at today.
The CFPB lawsuit
In January 2017, the Consumer Finance Protection Bureau filed a lawsuit against Navient. The CFPB accused Navient of failing to act in its customers’ best interests. Among other things, the CFPB charged that Navient:
- Failed to correctly apply or allocate borrower payments to their accounts
- Steered struggling borrowers toward multiple forbearances instead of an income-driven repayment (IDR) plan
- Deceived private student loan borrowers about cosigner release requirements
- Reported loans incorrectly to the credit bureaus
- Failed to inform borrowers of IDR plan renewal deadlines
In August 2017, Navient filed a motion for the CFPB lawsuit to be dismissed. A federal judge denied the motion.
Update: This lawsuit is currently still open as of April 10, 2020.
The CFPB lawsuit has been followed up with suits from the following states:
- Illinois (January 2017)
- Washington (January 2017)
- Pennsylvania (October 2017)
- California (June 2018)
- Mississippi (July 2018)
The allegations made by the attorney generals in each of these states are similar to those made by the CFPB.
Update: As of April 10, 2020, all of the state lawsuits are still open.
In October of 2018, nine teachers filed suit against Navient. They were supported by the American Federation of Teachers, the second-largest teacher’s union in the United States.
In their lawsuit, the teachers allege that Navient misled borrowers in public service professions when they tried to access Public Service Loan Forgiveness (PSLF). In particular, these teachers claim that Navient attempted to keep borrowers from transferring their loans to FedLoan Servicing (the exclusive servicer for PSLF) in order to avoid losing the associated fees.
The Navient Lawsuit Conclusion
In July 2019, a federal judge dismissed 14 of the 15 claims against Navient.
As of July 2020, the Navient settlement will require the company to train their representatives better on PSLF. Navient will also donate $1.75 million to a non profit that counsels student loan borrowers on their options.
Borrowers who received inaccurate information about their loans will receive nothing.
You’ll likely receive information about the Navient class action settlement because borrowers can hire their own attorneys to challenge it. That of course is not going to happen. Hence, we expect the settlement terms will be final and binding.
Guidance on Future Navient Lawsuits
Don’t expect any monetary damages for potential misinformation from Navient, either now or in the future. It’s important to note, that there’s no such thing as “Navient Student Loan Forgiveness.”
There will likely be future lawsuits surrounding Navient, but the legal basis for the ruling is that Navient is not required to act in your best interest as a servicer. That’s because the courts found Navient did not have a fiduciary duty to customers.
If you’re a Navient customer, you may qualify for one of the federal government’s student loan forgiveness programs.
From the beginning, Navient has been adamant that it has done nothing wrong and that it has serviced loans to the best of its ability.
In a rebuttal posted on its site, Navient responded to the CFPB’s allegations point by point. Here are two of its key claims:
- Borrowers serviced by Navient are 37% less likely to default than borrowers serviced by Navient’s peers.
- 53% of student loan balances serviced by Navient for the government are enrolled in income-driven repayment programs — more than any comparable servicer.
And Navient says there’s a good reason why it recommends forbearances so often to borrowers. It explains that forbearance is often a required tool to help people eventually become eligible to enroll in IDR plans.
It also says that servicers are paid up to 60% less for borrowers in forbearance. In other words, it would have no financial incentive to recommend a forbearance over IDR.
In short, Navient feels like it’s being picked on in these suits. It contends that it hasn’t done any worse than the other federal student loan servicers — and that it has often done better.
Navient and other federal student loans servicers aren’t set up for success
Despite its faults, Navient isn’t wrong in protesting that the student loan system as a whole is broken. As Travis Hornsby explained when news of Navient’s lawsuit was initially reported, these types of stories really shouldn’t be all too surprising.
The people working for federal loan servicers are overworked and often not given proper training. They may be too busy to give personalized advice to every borrower, so they “read from the script.”
And when the federal government first introduced the PSLF program in 2007, the Department of Education didn’t give a guidebook about how to handle it. Many servicers simply didn’t understand the rules.
Intent or incompetence?
In the suit being brought against Navient by the nine teachers, Jessica Saint-Paul, one of the plaintiffs, explains that she asked a Navient customer service representative about PSLF. She was told that she needed to make 120 consecutive payments in order to qualify.
Obviously, this is completely wrong because PSLF payments don’t need to be consecutive. And you can imagine how being told something like that could discourage you from even pursuing PSLF in the first place.
So assuming this is true, was Navient wrong in this situation? Absolutely. But was Navient purposely giving this type of wrong advice to public servants on a regular basis?
Or did Navient just fail to properly educate a customer service representative who ended up later giving a borrower bad advice?
In reality, the federal government requested a low cost contract to service millions of borrowers. That low cost translated into low pay for the customer service reps, which translated into poor customer service and frequent incompetence.
Borrowers are the ones who paid the biggest price.
What can you do if Navient is your servicer?
If your federal student loans are currently with Navient, these lawsuits may have you worried. But don’t panic. There’s a good chance your loan is being serviced exactly as it should be.
If you notice any problems with your student loans, however, contact Navient immediately. With all the bad PR Navient has dealt with over the past two years, the company should be eager to fix mistakes.
But if you come across an issue Navient won’t resolve, you can file a complaint with the CFPB or with the Department of Education.
How to switch servicers
Want to just switch student loan servicers altogether? Unfortunately, that’s not easy to do. The federal government only allows borrowers to switch servicers during a Direct Loan Consolidation.
You could also switch student loan servicers by refinancing your student loans; however, you’ll lose out on federal student loan benefits, including eligibility for student loan forgiveness programs like PSLF.
Your Student Loan Servicer is Not Required to Act in Your Best Interest
The most telling text from the conclusion of the Navient lawsuit is that one of the main defenses was that Navient “is not required to act in a customer’s best interest.”
You can absolutely get help from your servicer for free. Help like filling out forms, updating your address, asking your bank account to be debited, etc.
However, the finalized Navient lawsuit settlement to me implies that Navient, or any servicer for that matter, could tell you PSLF requires you to do 100 jumping jacks and believe in unicorns.
That’s why Student Loan Planner was founded: to be an unbiased source of advice about how to manage complex, large student loans.
Is Navient or any other federal loan servicer not giving you the personalized student debt advice that you need? If so, Student Loan Planner can help.
One of our Student Loan Planner consultants would love to talk through all the repayment strategies that may be available to you. Book a student loan consultation today.