US student loan corporation faces lawsuit for cheating millions
By
Seb Gomez
24 January 2017
Navient, the largest servicer of student loans in the United States, has recently been targeted by the Consumer Financial Protection Bureau (CFPB) and the state attorneys general of Washington and Illinois for misleading borrowers and other illegal practices that increased the loan repayment costs for millions.
Navient oversees some $300 billion in student loans for more than 12 million borrowers, 6 million of which are under contract with the Department of Education. In total the Delaware-based corporation, which was formed out of Sallie Mae in 2014, accounts for nearly one fourth of all student loan borrowers. The lawsuit alleges that every account may have been affected by the malpractice.
Navient is charged with misleading borrowers away from cheaper income-based payment plans in order to inflate loans with higher interest rates. Borrowers are legally allowed to change payment plans as they please. However, Navient is accused of advising its customer service employees to press customers away from the income-based plans and into forbearance, a short-term postponement of payment normally appropriate for those with temporary financial difficulty.
Those placed into forbearance without proper knowledge of the terms face significantly higher costs, which generally increase the longer the payments are postponed. Such costs include the accumulation of unpaid monthly interest and the addition of unpaid interest to the principal balance of the loan, resulting in a recalculation of the loan based on the compounded interest.
The court filing concluded that from 2010 to 2015, Navient enrolled 1.5 million borrowers in two or more consecutive forbearances, more than 470,000 in three…