Student loan servicer hit with three government lawsuits in one day
by Danielle Douglas-Gabriel, The Washington Post
Navient, one of the largest student loan management companies in the country, misallocated payments, steered people into costly plans, supplied the wrong information and ignored borrowers’ pleas for help, according to a lawsuit filed Wednesday by the Consumer Financial Protection Bureau.
The case is one of three separate complaints by government authorities that paint Navient as a company more interested in serving its financial interests than the needs of struggling student loan borrowers — a characterization the firm vehemently denies.
“Navient has systematically and illegally failed borrowers at every stage of repayment,” CFPB Director Richard Cordray said on a call with reporters Wednesday. “These unlawful practices have cost student-loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again.”
Among the most serious charges in the CFPB complaint is an allegation that Navient incentivized employees to encourage borrowers to postpone payments through forbearance, an option in which interest continues to accrue, rather than enroll them in an income-driven repayment plan that would avoid fees. As a result, the CFPB says Navient amassed $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances from January 2010 to March 2015.
Furthermore, the bureau accuses Navient of misleading people about the terms of renewing enrollment in income-driven repayment plans that cap monthly bills to a percentage of earnings, and misreporting the loan discharge of disabled borrowers to the credit bureaus. The complaint also claims Navient’s subsidiary, debt collection agency Pioneer Credit Recovery, made illegal misrepresentations about the federal loan rehabilitation program available to defaulted borrowers.