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Believe it or not, student loan servicer Navient is facing yet another lawsuit for its deceptive lending tactics, which Pennsylvania Attorney General Josh Shapiro describes as 'unfair and deceptive.' Navient insists they are in the clear, but here’s what you need to understand, regardless.
This marks the fourth lawsuit against Navient this year. The Consumer Financial Protection Bureau (CFPB) filed a case earlier, accusing them of shady practices, to which Navient responded, 'A servicer’s role is to collect payments owed by borrowers... there is no expectation that the servicer will ‘act in the interest of the consumer.’'
In their latest response to this lawsuit, Navient claimed that they are operating within the guidelines set by the Department of Education. However, under Secretary of Education Betsy DeVos, the Department has rolled back borrower protections. As one student loan attorney stated to Student Loan Hero:
This third lawsuit filed against Navient by a state attorney general signals that states are ready to intervene and protect consumers. As the Department of Education reduces borrower protections, more states are likely to step in to shield their citizens from these exploitative practices.
Meanwhile, Student Loan Hero breaks down exactly what Navient is being sued for and highlights what borrowers should watch out for:
Navient issued predatory loans to students attending schools with graduation rates below 50%, banking on the assumption that many students wouldn’t be able to repay their debts.
Navient used a 'baited hook' strategy by offering subprime loans, becoming a preferred lender at many schools, all while knowing that these subprime borrowers were likely to default.
After the introduction of income-driven repayment (IDR), Navient intentionally pushed borrowers toward forbearance rather than advising them on more affordable repayment options.
Navient admitted it: they’re not in the business of looking out for your best interests. Let these claims serve as a reminder to be cautious when considering your options for higher education.
First, it’s crucial to research key details such as your school’s graduation and job placement rates, as these can give you an idea of how likely you are to repay your loan on time (and, more importantly, avoid falling into default).
However, many for-profit colleges have faced scrutiny for misleading students about their job placement rates. Since much of this data is self-reported and schools often exaggerate the numbers, it's important to dig deeper during your research. My College Guide recommends asking the following questions:
Are the job rates considered “placed” or “employed”?
'Placed' could mean a student enrolled in graduate school, whereas 'employed' indicates that they secured a job.
Were they employed, and if so, were they employed in their field of study?
There's a significant difference. You might be employed, but working a low-wage job that doesn’t require a degree. One school was
recently fined $30 million
for falsely claiming a high employment rate while many of its graduates were working in fast food and other low-paying jobs.
What time frame does the statistic cover?
Are students finding jobs within six months, or does the data reflect job placement rates years after graduation?
Second, if you're struggling to repay your student loan, explore options beyond forbearance. Forbearance lets you pause your payments for a set time, but once that period ends, you’ll typically owe the interest that accrued, making it a less-than-ideal choice.
Deferment is similar to forbearance in that it lets you temporarily stop your loan payments if you’re facing financial hardship. However, with deferment, interest generally stops building up during this time, making it a more favorable option.
Federal loans also offer Income-Driven Repayment plans, which could be a better short-term solution to help manage your finances. Depending on your income, Income-Based Repayment (IBR) plans can reduce your monthly payment and provide some breathing room. We’ve written about additional student loan relief options here. The key takeaway is that with fewer protections for borrowers, it's crucial to be aware of your options and safeguard your financial well-being.
