Student Loan News: Court Documents Put Navient in Focus

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Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Federal loan servicer said to have steered borrowers into forbearance

“Forbear them, forbear them, make (borrowers) relinquish the ball.”

That was the “battle cry” of Navient leadership, at least according to a 2010 memo released as part of the federal student loan servicer’s ongoing legal battle with the Consumer Financial Protection Bureau (CFPB).

“Said another way, we are very liberal in our use of forbearance once it has been determined that a borrower cannot pay cash or utilize other entitlement programs,” continues the memo, which was posted online by the nonprofit Student Borrower Protection Center.

Forbearance allows struggling federal loan borrowers to postpone their loan payments, avoiding default, but also piling on additional interest. According to the CFPB, encouraging borrowers to pause their repayment — instead of other options, such as enrolling in income-driven repayment (IDR) — added $4 billion to Navient’s revenue.

In the memo, released in federal court, the Navient executive in question also estimated that 7 out of every 10 federal loan borrowers would end up in forbearance, but adds: “That mix is likely to change over time as we improve our ability to communicate the benefits of and fulfill other programs such as income-based repayment.”

Navient — a publicly traded corporation which has been sued by various states over similar issues surrounding its student loan servicing — countered that the memo is being mischaracterized. The servicer’s general counsel told the Washington Post that Navient enrolls borrowers in IDR at a high clip compared to other federal loan servicers.

The Washington Post report said, however, that other released court documents might not reflect well on Navient either. For instance, one unsealed record shows that the head of the company’s call centers in 2011-2012 wasn’t aware that IDR was even a possibility for borrowers.

How it affects YOU: If you have Navient-serviced student debt, you might already be familiar with the company’s checkered history. If you find yourself having trouble with you servicer, then it’s vital that you take charge of your own repayment. Understand your options, and don’t be afraid to dictate your choices to your servicer. This way, you can ensure you’re headed in the right direction.

Of course, you don’t have to go it alone. For unbiased assistance, consider our guide on who to ask for repayment advice.

Also in the news …

  • The rate of default among federal student loan borrowers eased from 10.8% (in 2015) to 10.1% (in 2016), according to data shared by the Department of Education on Monday. However, the department also singled out 15 schools, mostly for-profits, that posted especially high default rates, putting their access to federal financial aid at risk, according to Politico.
  • Politico also reported this week that the department’s Federal Student Aid office hopes to increase its staff and resources, particularly as it prepares to establish the new loan-servicing platform NextGen.
  • New York Gov. Andrew Cuomo on Wednesday rolled out the details of his proposed rules for student loan servicers operating in the state, opening the plan to public comment. The governor announced plans in January to have all loan servicers licensed by the state, following gains in the midterm elections for Cuomo’s fellow Democrats.
  • Billionaire Robert F. Smith promised in May to pay off the student loan debt accrued by Morehouse College’s Class of 2019, and the school announced Friday that Smith came through on his pledge. His $34 million gift paid off the debt of 400 students, plus any loans borrowed by their parents. Smith, among other deep-pocketed student loan philanthropists, also helped fund Morehouse’s Student Success Program to help future students avoid education debt too.
  • A Pennsylvania legislative proposal called “First Responder Loan Forgiveness Program” was presented to the state’s House of Representatives late last week. If passed, the program would award up to $16,000 of student loan repayment assistance to emergency medical technicians, including volunteer firefighters, after four years of service.
  • Last Friday, Politico reported that the Department of Education admitted in a California court filing that it incorrectly sought student loan payments — and in some cases, wage garnishments — from Corinthian Colleges’ alumni who were due debt relief. Those approximately 16,000 students are now expected to receive refunds on those payments.
  • Walmart will help interested employees complete a bachelor’s degrees in the healthcare field, Yahoo Finance reported Tuesday. The company’s “Live Better U” program charges a cost of attendance of $1 per day.

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Published in News & Policy, Student Loans

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