Navient is a publicly-traded student loan servicer familiar to many Americans with student loan debt. The company formally split off from Sallie Mae and contracts with the U.S. Department of Education to service and collect upon student loan accounts. Now, the company is being criticized in an audit conducted by the U.S. Department of Education.
What Did the Audit Report About Forbearance?
The audit was conducted in 2017 but is just now being released to the public. Navient is accused in a series of lawsuits with steering borrowers into higher cost repayment plans in order to boost its profits. In particular, Navient is criticized over the use of student loan forbearance. Forbearance allows student loan borrowers to defer payments for a period of time.
However, interest on the loan still accumulates during forbearance and it can be costlier for the borrower over time. For example, a borrower with $30,000.00 in student loans and who is granted forbearance for 36 months (the maximum allowable time) would end up paying about $6,742.00 in additional interest. The U.S. Consumer Financial Protection Bureau has alleged that Navient’s improper use of forbearance has cost borrowers almost $4 billion in interest between 2010 and 2015.
The audit revealed that Navient employees, while speaking with borrowers, failed to discuss options other than forbearance which might be a better deal for the borrowers. For example, one option that might be better for a borrower is a repayment plan based on the borrower’s current income. This allows the borrower to make affordable payments (instead of making no payments at all) and thereby avoid incurring additional interest charges. This option may be better because it costs the borrower less over time.
The criticism is that Navient representatives simply don’t take the time or the effort to really help a borrower select an option that’s truly best for the borrower. It’s easier to simply put the borrower in forbearance and move on to the next borrower.
How Many People Have Been Affected?
The audit did not reveal how many borrowers may have been affected by the alleged improper practices. Navient says that they service about 6 million accounts and that approximately 12.7% of those accounts are 30 or more days past due. That equates to about 762,000 borrowers struggling with their student loan debts. If one in ten of those borrowers was put in forbearance instead of an income-based repayment plan, then 76,200 borrowers could have been affected.
Navient disputes the allegations in the lawsuits filed against them. According to the company, the number of their borrowers in an income-based repayment plan is in line with other student loan debt servicers. The company also maintains that it is paid less, not more, for borrowers who are put in forbearance.
Contact a Trusted Bankruptcy Lawyer to Get Ahold of Your Student Loan Debt
Regardless of whether Navient has engaged in the improper practices for which it stands accused, this situation keenly illustrates the critical importance of accurate and personalized information about student loan repayment options. If you are struggling with student loan debt (or any other debt), our attorneys can help you with a personalized review of your situation. We will sit down with you and discuss your situation with you. During that discussion, we will identify and discuss all your options to finally and permanently resolve all your debt. Please contact us to schedule your consultation.
Ed Woods is the Managing Attorney of several of the Bond & Botes Law Offices throughout Mississippi. He holds a Bachelor of Science from the University of Southern Mississippi, and a Juris Doctorate from Mississippi College School of Law. Ed puts his extensive knowledge of bankruptcy law to use defending consumers from debt collection lawsuits and more. Read his full bio here.