Student loan giant cheated borrowers, new lawsuit says

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Student loan giant cheated borrowers, new lawsuit says
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Navient, formerly part of Sallie Mae, is accused of “systematically” and “illegally” failing borrowers who were trying to repay their student loans.

Student loan giant sued: What borrowers need to know! 

Read more: 6 student loan mistakes to avoid at all costs

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against the company, which services more than $300 billion in federal and private student loans (including the loans for more than 12 million borrowers), the CFPB said. 

The lawsuit alleges that Navient provided bad information in writing and over the phone, processed payments incorrectly and did not act when borrowers complained about problems.

‘For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,’ said CFPB Director Richard Cordray. ‘At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.’

Here are the specific allegations the CFPB laid out against Navient:

  • Repeatedly misapplied or mis-allocated payments, often making the same error multiple times over many months.
  • Steered struggling borrowers into forbearance, an option designed to let them take a short break from making payments. Interest continues to add up during this period.  
  • Failed to adequately inform borrowers who successfully enrolled in an income-driven repayment plan of critical deadlines or the consequences if they failed to act.
  • Deceived private student loan borrowers about requirements to release their co-signer from the loan.
  • Harmed the credit of disabled borrowers, including veterans, who have a right to seek loan forgiveness under a federal program. Misreported to the credit reporting companies that the borrowers had defaulted.

Read more: Beware of these student loan debt offers that will rip you off

Read the full complaint against Navient by following this link to the CFPB’s website.

According to the CFPB, the lawsuit seeks relief for borrowers who were harmed by the company’s alleged illegal actions. It also hopes to stop the practices to prevent new borrowers from being harmed.

In a statement, Navient said the allegations are completely false and politically motivated.

Student loans make up the nation’s second largest consumer debt market, with more than 44 million federal and private student loans. These borrowers collectively owe roughly $1.4 trillion, according to the CFPB. 

If you’ve had any issues with repaying your student loans, you can file a complaint with the CFPB here.

Student loans 101: Everything from how much to borrow to paying it off

 

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Mike Timmermann About the author:
Michael Timmermann paid off his mortgage in two years. Now, he shares his money-saving tips on his blog, Save on Almost Everything.
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