Navient Settlement Raises Issue of Student Loan Responsibility

By Cynthia Cai
Cynthia Cai
Cynthia Cai
Cynthia is a reporter based in the San Francisco Bay Area covering Northern California news.
January 19, 2022Updated: January 21, 2022

A Jan. 13 settlement between student loan servicer Navient and 39 states will cancel $1.7 billion in student loans, but the agreement has raised questions about the issue of student loan accountability.

The settlement resolved a long-standing lawsuit that alleged that Navient, previously known as Sallie Mae, engaged in unfair practices by steering student loan borrowers into forbearances and away from federal student loan relief programs.

California Attorney General Rob Bonta said during a press conference: “This settlement isn’t just a step towards accountability for these unscrupulous actions. In addition to monetary relief and debt cancellation my colleagues discussed, today’s settlement also includes significant injunctive terms to prevent Navient from engaging in future misconduct.”

Per the terms of the settlement, Navient agreed to cancel loan balances for approximately 66,000 borrowers with certain qualifying private education loans originating between 2002 and 2010. The company will notify qualified borrowers in the coming weeks pending final court approval.

“Navient was more focused on money, not serving the people that they were trusted to help. Sallie Mae was given a special mission to help Americans finance their education and launch a career. Instead, their practices burdened hundreds of thousands with debt,” Pennsylvania Attorney General Josh Shapiro said during a press conference.

The Consumer Financial Protection Bureau (CFPB) filed a similar lawsuit in 2017, also claiming Navient encouraged student loan borrowers into forbearances and inflating financial burdens.

In a 2019 audit [pdf], the U.S. Department of Education’s Office of Inspector General concluded that Navient representatives often placed borrowers in long-term forbearances instead of offering income-driven repayment plans or Public Service Loan Forgiveness.

However, despite the lawsuits and settlement, Navient denies all charges, insisting there is no evidence to substantiate the allegations.

“This is really about eliminating a time-consuming, distracting and costly process,” Jack Remondi, Navient’s chief executive, said in an interview with The Washington Post. “With the ability to explicitly deny the claims that were made in these cases and borrower harm, I think it’s noteworthy that we’re not giving up on our defense here. We’re just agreeing that it’s time to move on.”

On Twitter, student loan borrowers with Navient expressed differing experiences.

One man wrote: “I just paid off an old student loan after almost 17 years. No government help whatsoever.”

Another person wrote: “Navient I pay you $1000/month and yet my balance only goes down $94. You’re crooks and I hope you all get what you deserve. I’ve been paying on these loans for over 10 years and my balance has more than doubled.”

Jonathan Madison, a civil rights attorney, told The Epoch Times that this settlement comes at an interesting time, given President Biden’s multiple student loan repayment pauses.

“President Joe Biden has increasingly sort of pushed this idea of forgiving student loans, and now we have a settlement with Navient for loans that its predecessor actually undertook. It wasn’t even Navient. So now all of a sudden we have 1.7 billion in student loan relief. … It’s really interesting, the timing of this,” said Madison.

He predicts that this might not be the last lawsuit seeking to investigate student loan servicers.

“Decisions like this sort of open up the floodgates, right? People are looking at this and saying, ‘Well, you know, I have student loans from the past, or I’m thinking of acquiring student loans in the future, and I’d like an opportunity like this,’” Madison theorized.

Epoch Times Photo
Students at a graduation ceremony. Many graduate with unpayable, crippling student debt. (Andreas Rentz/Getty Images)

Two-Way Accountability

The lawsuits and investigation concluded that Navient engaged in unfair practices, but Madison described student loan servicing as a two-way relationship with accountability on all sides.

He said students should take out loans with the mindset of repaying them, and loan servicers and the government can negotiate with students to temporarily defer loan repayment in cases of real financial stress.

He advises students and families seeking to take out loans to take their time to carefully read the fine print and understand what types of loans they may be signing up for. Madison compared the current sentiment among student loan borrowers to the housing bubble.

He said: “You have the same issue that sort of arose in the 2008 housing bubble and crash. There’s a lot of people out there who feel they’re being taken advantage of, and some of them were taken advantage of perhaps. But you also have people who had an opportunity to read the fine print, and they just didn’t [feel they were taken advantage of]. So it’s not enough to rely on the student loan servicer to provide you with all of the high-level information or all of the detailed information.”

However, cases of fraudulent lending practices, subprime lending practices, scams, and crimes do exist.

In 2020, five south Bay Area residents faced criminal charges for their alleged roles in a student loan assistance scam. The individuals illegally created and accessed the U.S. Department of Education’s computer systems and personal account records without authorization and defrauded student borrowers out of funds.

In December 2021, the California Attorney General sentenced four of the individuals for accessing and disrupting student loan borrower account data and creating new student borrower accounts while posing as loan borrowers.

“If there’s evidence that the loan was serviced in a fraudulent way or the information or disclosures are controversial, the loan servicer was pushing a kind of agenda on the student, I think it should be evaluated to determine how unfair the practice was and whether the student or former student could have picked it up just by reading the fine print. Because there are some cases where people are taken advantage of,” Madison said.

He believes that cases of actual fraud or scams should be investigated to hold lending companies accountable for their practices, and borrowers are equally accountable for taking the time to understand the loans they take out.

“I don’t think it necessarily warrants a cancellation if people took out the loan and there’s no agenda and they just don’t want to pay it,” he said.

Navient and the California Attorney General’s office did not return requests for comment.