Legal Claims Against Navient and Sallie Mae

Navient, the nation’s largest servicer of both private and federal student loans (serving over 12 million accounts and over $300 billion in student debt), and its former parent company, Sallie Mae, are being sued by the Consumer Financial Protection Bureau for unfair and unlawful student loan practices. Here is a rundown of the eight major claims against Navient and Sallie Mae:– Incorrectly allocating borrowers’ repayments – Navient frequently misallocated borrowers’ payments against their expressed instructions, preventing them from reducing long-term debt by allocating extra payments toward principal balances.– Pushing borrowers into forbearance instead of income-based repayment – IBR-eligible borrowers were instead encouraged to go into forbearance, which temporarily delays payments but also extends the repayment period and can drastically increase the amount of interest owed. Navient made over $4 billion in unnecessary interest.– Failing to outline IBR requirements – Borrowers in IBR plans must renew annually, but many of Navient’s borrowers weren’t notified of their obligation to renew and missed important deadlines as a result.– Deceiving borrowers regarding co-signer releases – The Washington State Office of the Attorney General claims that “Navient put up arbitrary barriers and failed to disclose that very few borrowers ever achieve co-signer release.” A certain number of consecutive on-time payments is necessary, but Navient also misapplied prepayments and reset the count when a borrower pre-paid and skipped a month which was already covered.– Pushing subprime loans on students of for-profit schools – Students of for-profit schools, including schools with completion-rates under 50%, were targeted with expensive subprime loans that Sallie Mae knew they were unlikely to pay back in a timely manner.– Misreporting discharged TPD loans as defaulted – Permanently-disabled borrowers, including veterans, in the Total and Permanent Disability (TPD) Discharge program had their successfully-discharged loans instead reported as in default to credit companies, which damaged their credit and ability to purchase a car or home.– Attempting to over-collect from delinquent borrowers – The Washington State Office of the Attorney General also alleges that Navient falsely overstated borrowers’ dues for settling delinquent loans, such as by wrongfully adding the next month’s payment to the “present amount due.”– Misleading borrowers about rehabilitation’s effects on credit –Navient subsidiary “Pioneer Credit Recovery,” which handles defaulted student loans, misrepresented the rehabilitation process for borrowers who have defaulted on federal student loans and also falsely implied that loan-rehabilitation would clear borrowers’ defaults from their credit reports.