Recently released court documents related to a lawsuit brought by a federal enforcement agency against Navient paint a troubling picture of one of the nation's largest student loan companies.
The federal Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Navient in 2017 alleging a variety of unfair and deceptive practices that harmed student loan borrowers. Since then, several state attorneys general have also filed suit against the company alleging similar acts of misconduct.
Last week, a federal judge overruled the objections of Navient's attorneys and ordered the release of previously-sealed documents related to the suit brought by the CFPB. Here's what we learned.
Navient pushed people into costly forbearances. It can be time consuming to provide borrowers with sufficient information about their repayment plan options to allow them to make an informed decision, particularly during times of financial hardship. So what did Navient do? It pushed people into forbearance, which is quick and easy, but can also cause significant balance growth due to interest accrual and capitalization. Being in a forbearance status can also prevent borrowers from making progress towards loan payoff or loan forgiveness. An unsealed 2010 strategy memo by a senior executive revealed Navient's strategy in no uncertain terms: "Forbear them, forbear them, make them relinquish the ball."
Navient was focused on its bottom line. In the same memo, executives argued that borrowers should be steered towards solutions that are optimal for both the borrower and Navient. The implication, of course, is that an option that was good for the borrower, but bad for Navient's bottom line, may not have been relayed to borrowers by call center reps.
It took years for Navient to start telling student loan borrowers about new repayment options. Income-Based Repayment (IBR) was enacted in 2009, but Navient did not start informing student loan borrowers of its existence until after 2012, according to unsealed statements made by Navient call center reps.
Navient's leadership was aware that student loan borrowers were having difficulty accessing federal student loan repayment and relief programs. The CFPB lawsuit documents identify several instances through 2014 and 2016 when Navient's CEO was specifically informed that borrowers were still being steered into forbearances, rather than income-driven repayment plans like IBR, Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).
You can read the full cache of unsealed documents related to the CFPB lawsuit against Navient here.
