California Attorney General Xavier Becerra announced Thursday that the state will file a lawsuit against Navient, one of the largest student loan servicers in the U.S., accusing it of unlawful business practices, including causing borrowers to overpay on federal student loans.
The move makes California the fourth state to sue Navient, which services student loans for more than 12 million borrowers. The company also faces action from the Consumer Financial Protection Bureau (CFPB).
What is Navient accused of?
Navient, which services both federal and private student loans, is one of eight companies entrusted by the U.S. Department of Education to collect payments on government-issued student loans.
California’s lawsuit echoes serious issues raised in a January 2017 suit by the CFPB, a federal agency created to fight financial abuses, as well as complaints made by Illinois, Pennsylvania, and Washington.
These states and the CFPB allege that Navient:
- Inappropriately advised borrowers to put loans into forbearance (pausing payments but not interest), which resulted in total loan balances increasing, since interest continues to accrue
- Improperly steered borrowers away from income-driven repayment plans (which can cut their monthly payments based on how much money they make), even when many of the borrowers would have qualified to pay nothing
- Failed to properly alert borrowers in income-based repayment plans that they needed to re-enroll after 12 months so that payments didn’t go up
- Improperly processed payments by ignoring borrower instructions to apply their money toward specific loans, instead of distributing payments among all outstanding loans
- Created obstacles to cosigner release (in which a cosigner’s name is taken off the loan), including making it more difficult to meet requirements that borrowers make 12 consecutive repayments
- Misled borrowers about what happens when those in default take steps to rehabilitate their loans
- Improperly reported that disabled borrowers had defaulted on their loans instead of having loans discharged
Illinois, Washington, and Pennsylvania also claimed that Navient gave private student loans to borrowers who weren’t qualified and who were likely to default. Illinois Attorney General Lisa Madigan described the loans as “designed to fail.”
Borrowers filed a class action suit in federal court in Florida alleging Navient misled them about qualifying for Public Service Loan Forgiveness (PSLF), which would result in student debt being forgiven for eligible borrowers after 120 on-time payments.
California and the three other states, along with CFPB, are seeking remedies that include loan forgiveness, reimbursement of overpayments, and other debt relief for borrowers. Navient has tried to get these cases dismissed, but the judges who’ve ruled on the issue so far have rejected the company’s requests.
Navient said it would fight the allegations made by California, calling them “unfounded,” according to The New York Times.
What should borrowers do?
Student loan borrowers who have loans serviced by Navient must continue to make their payments while the lawsuits play out in court.
However, here are some steps you should take to protect yourself.
- Keep careful records of all payments made and of all your correspondence with Navient.
- File complaints against Navient with the attorney general’s office in your state if you believe you were treated improperly. Each state has its own forms to submit, including California’s consumer complaint form. You also can submit a claim with the CFPB and the Department of Education.
- Research your repayment options and the requirements to qualify for PSLF — do this independently instead of relying on Navient’s advice. Our guides to income-driven repayment and PSLF programs can help.
- Check your credit report if you were disabled and had Navient loans discharged. You should make sure none of those loans show up on the report as past due.
- Refinance or consolidate your student loans to switch servicers. You shouldn’t switch loan servicers just to avoid Navient, but you can research these options to see if they’re right for you.
It also is a good idea to monitor how these lawsuits unfold, as you may become qualified for remedies through a settlement or court verdict against Navient.
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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