A class-action lawsuit against Navient is one of many recent developments in the student loan industry. It alleges that the company improperly used subprime loans, which contributed to the recent mortgage crisis. In addition, the company is accused of providing poor service to student loan borrowers. While the company has denied any wrongdoing, it should be investigated to determine the full extent of its obligations to its customers. Many other details support the plaintiffs’ claims.
Navient deceptively promoted the “co-signer release” feature of private loans
This complaint alleges that Navient misrepresented the co-signer release feature of private loans and set up arbitrary barriers that prevent borrowers from obtaining this feature. Navient also failed to disclose that only a small number of borrowers ever achieve co-signer release. A judge ruled that Navient violated the State’s Consumer Protection Act. However, there is a silver lining to this case: Navient’s lawsuit will help protect consumers from future misrepresentations of private loans.
The lawsuit alleges that Navient failed to notify borrowers that they could remove a co-signer after making certain consecutive on-time payments. While Navient claimed its primary job is to collect money from U.S. Department of Education borrowers, these borrowers were unfairly penalized because they were unable to make the required payments. Moreover, Navient’s emails to borrowers did not include this information.
In addition to deceptively marketing the “co-signer release” feature, Navient was also a servicer of student loans. Its aggressive lending strategy has paid off for the company – in 2017 it acquired over $10 billion in new student loans. The borrowers who were eligible for restitution will be receiving a postcard in the spring of 2022. This is only the beginning.
Navient failed to disclose that very few borrowers ever achieved co-signer release
One of the most significant aspects of the Navient deception was its failure to disclose that very few borrowers ever achieved a co-signer release. The company failed to disclose that the requirements to obtain a co-signer release were too strict, leaving borrowers with black marks on their credit reports and no means to secure a loan. Navient also failed to inform borrowers that making a lump sum payment ahead of time or missing a monthly payment constituted an automatic disqualification.
In addition to failing to disclose that very few borrowers accomplished a co-signer release, Navient failed to provide accurate information about the terms of the program. In addition to failing to disclose that very few borrowers ever achieved a co-signer release, the company also failed to tell borrowers that there were few benefits to this type of loan. The company allegedly misapplied their payments, charged them unexpected fees, and misrepresented repayment options and amounts.
In addition to the misrepresentation of co-signer releases, Navient’s payment processing procedures were also prone to mistakes. For instance, Navient sometimes divides a lump sum payment across all loans and ignored the co-signer’s instructions, which were often written on the payment itself. Furthermore, the company did not use mail-reading equipment to detect the written notes. This problem is especially problematic for private student loans because the co-signer is legally responsible for the repayment of the loan.
Navient didn’t offer loan forgiveness in exchange for paying a fee
Despite its name, Navient didn’t offer loan forgiveness in return for a fee waiver. Instead, it offered predatorily, subprime loans to students it knew would not be able to repay. It marketed these loans as “forbearances” to lure schools to use Navient as their preferred lender for federal student loans. It also engaged in unfair servicing practices, including not following borrower instructions and adding interest to delinquent accounts.
The settlement also excludes federal student loan borrowers. Of the 350,000 federal student loan borrowers eligible for restitution, only about half of them will get it. This amount equates to $260 per person. However, only certain federal loan borrowers will qualify for the settlement, as they had to be steered into forbearance over the phone. They must have met the two-year requirement.
After a year, Navient has settled with the Massachusetts Attorney General and other state attorneys general. While they weren’t able to offer full loan forgiveness, Navient has resolved the problem. The Attorney Generals’ Office and state attorneys general have filed similar lawsuits against Navient. The plaintiffs allege that the company steered borrowers toward forbearance and income-driven repayment plans, which harmed them. However, borrowers can qualify for student debt relief through the Public Service Loan Forgiveness program after ten years of qualifying public service employment.