Navient lawsuit outcome explained: 3 lessons to learn from the case

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Stanley tate

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Many public school teachers with federal student loans count on help from the Public Service Loan Forgiveness (PSLF) program. Unfortunately, many of the teachers eligible for this program aren’t getting the loan forgiveness they hoped for.

Now student loan borrowers are fighting back. Navient Corp., one of the largest student loan servicers in the United States, is the subject of a class-action lawsuit for failing to apply payments correctly and wrongly rejecting loan forgiveness applications.

Navient services both federal and private student loans that borrowers take out to cover higher education costs. Launched by the loan company Sallie Mae, they’ve serviced over $300 billion of student loan debt for over 10 million borrowers.

Disclaimer: While I do recommend some products with affiliate links in this post, they’re ones I’ve seen work over years of experience as a student loan lawyer. I started this business to help a friend, and I’ll treat you with the same respect.

Why did teachers sue Navient?

It is notoriously difficult to receive funds from the PSLF program. For example, in April 2021, only 3.4% of applicants were approved for loan forgiveness through the PSLF. That’s up from an approval rate of 1.4% in December of 2019.

The American Federation of Teachers union, along with a small group of teachers, sued Navient Solutions, LLC in federal district court in New York.

The suit alleged that the student loan servicer told borrowers to apply for repayment plans and forbearance instead of loan forgiveness programs.

As a part of student loan servicing, Navient is supposed to guide people through the many requirements of applying for the PSLF program. According to the teachers, Navient failed to do that.

Instead, Navient’s representatives gave them insufficient information about loan forgiveness, failing to tell them everything they needed to know to navigate the complex qualification process. It also discouraged them from taking steps to qualify for the program.

Essentially, Navient did everything it could to keep borrowers from understanding how to reduce what they owed their lenders, usually the U.S. Department of Education.

In addition, student loan borrowers, the state attorneys general of California, Illinois, Mississippi, New Jersey, Pennsylvania, and Washington, and the Consumer Financial Protection Bureau (CFPB) filed lawsuits alleging that Navient:

  1. Violated consumer protection laws and used deceptive practices to keep borrowers in payment plans that would make Navient more money
  2. Misdirected borrowers and did not help them find the best repayment options for their loans, including income-driven repayment plans and loan forgiveness programs
  3. Misapplied payments made by borrowers
  4. Did not provide clear directions for releasing co-signers from student loans or re-enrolling in income-driven repayment plans

These legal actions were taken separately from the teachers’ lawsuit, and many are still in process.

What was the outcome of the case?

In 2020, Navient settled the lawsuit brought by the teachers and the American Federation of Teachers union. In the settlement, Navient didn’t have to admit any wrongdoing, but it did agree to make some changes for future borrowers.

For the teachers

Each of the teachers in the lawsuit received $15,000 from Navient, according to the Washington Post. Current and future teachers who have loans serviced by Navient will receive additional support to help them apply for loan forgiveness programs.

Changes Navient must make

As part of the settlement, Navient agreed to ramp up the training their representatives receive so their employees can identify customers who might be eligible for loan forgiveness programs.

They’ll also send standardized forms to borrowers who want more information about forgiveness as part of their effort to improve communication.

Navient also agreed to pay $2.25 million to help fund the new Public Service Promise organization, which is being developed to help student loan borrowers in public service apply for loan forgiveness programs.

Each year, Navient will have to certify that they’ve complied with the terms of the settlement. This includes recording calls with borrowers to ensure that they’ve been given accurate information and that they’ve been informed of all forgiveness programs they’re eligible for.

3 things to learn from this case

There’s a lot we can learn from the Navient lawsuit. When it comes to personal finance and student loans, you can’t always guarantee that the big institutions have your best interests at heart. There are 3 actionable items federal borrowers can take from this case.

1. Loan forgiveness is tricky

Federal loan forgiveness programs have stringent requirements, and it can be tricky to make sure you meet those requirements. Here are a few requirements you’ll need to meet to get your loans forgiven:

  • You must have direct federal student loans. Private loans don’t qualify for federal loan forgiveness programs.
  • Provide all of the information required on the application. Thousands of applications are rejected each year because they were incomplete or didn’t include all of the information required for approval.
  • Get help. If you don’t have the time or energy to make sure you’ve checked every box and filled out every form, hire someone who can help.

You can find a lawyer for student loans or get advice on tricky situations by looking for a lawyer who specializes in student loan forgiveness and settlement, like me, Tate.

2. Ensure you’re protected

If you do qualify for student loan forgiveness, you should take steps to make sure you’ve protected yourself from possible mistakes. Here are a few ways to make sure you’ve done everything you can to get your loan forgiveness application approved:

  • Get everything in writing. If your loan servicer promises to do something or tells you you’re eligible for a program, get it in writing. Having a representative tell you something over the phone isn’t enough. You need a written statement to protect yourself.
  • Make sure you’ve filed correctly. A surprisingly high number of loan forgiveness applications are rejected because they were incomplete. Make sure you’ve filled out everything the right way, or hire a lawyer who can help you do things right.
  • Look over your credit report. Get your free annual credit report each year and make sure it’s correct. Ensure that all of your monthly payments have been recorded correctly and that there aren’t any incorrect debt collections or other errors on your report.

3. Take the time to educate yourself

One of the biggest takeaways from the Navient lawsuit is your student loan company may not fully or accurately explain all of your debt relief options to you. You can’t count on them to make sure you qualify for the loan forgiveness you may be counting on.

One of the best places to educate yourself is the Department of Education’s office of Federal Student Aid. The office has many resources to help borrowers qualify for forgiveness programs, including a free PSLF Help Tool.

You can also count on Tate Law to give you the most accurate, up-to-date information on student loan forgiveness programs. Be sure you sign up for our newsletter at the bottom of the page to stay in the loop about saving money on your student loans.

Qualifying for loan forgiveness

Qualifying for student loan forgiveness can be challenging, but it is possible. There are 3 main ways to qualify for student loan forgiveness:

  1. Public Service Loan Forgiveness
  2. Teacher Loan Forgiveness
  3. Income-Based Loan Forgiveness

Public Service Loan Forgiveness

The federal government’s Public Service Loan Forgiveness program is one of the main ways borrowers can qualify for loan forgiveness. Congress sets the requirements for the program, which is then run by the U.S. Department of Education’s office of Federal Student Aid (FSA).

The Public Service Loan Forgiveness program has 5 basic requirements:

  1. You must have Direct Loans, including Direct Subsidized and Unsubsidized Loans, Direct Graduate PLUS Loans, and Direct Consolidation Loans.
  2. You must work full-time.
  3. You must work full-time for the government or a qualified nonprofit.
  4. You must pay your loans under a qualified repayment plan (any income-driven repayment plan will do).
  5. You must make 120 on-time monthly payments. (The payments don’t have to be consecutive.)

The best thing to do, in my opinion, is to complete the student loan forgiveness paperwork annually. Don’t listen to your servicer if they tell you that you don’t have to complete that form. Technically, you don’t have to submit that form. But you should. It’s your evidence.

Also, because you’re working towards getting your loans forgiven, you should try to get the lowest monthly payment you can get under an income-driven repayment plan. Why pay more than you should if it’s all going to get forgiven anyway?

Teacher Loan Forgiveness

Teachers may be eligible for the federal Teacher Loan Forgiveness program as well, based on their time in the profession, their loan type, and a few other factors.

Per federal law, you qualify for Teacher Loan Forgiveness if:

  1. You’re a highly qualified full-time teacher for at least 5 years straight at an eligible low-income school or educational service agency. If you didn’t teach for the full year, it’s because at least one of the following applied:
  1. You went back to school at least half-time for additional education in a subject(s) directly related to your teaching
  2. You were on FMLA
  3. You were on active duty military leave for more than 30 days
  1. You have Federal Direct Student Loans that you took out before the end of your 5 qualifying years of teaching (PLUS parent and graduate loans are ineligible).
  2. You are fully licensed to teach in your state and meet all state standards for teacher competency.
  3. Your loans are not in default, or if you have defaulted, you’ve made satisfactory repayment arrangements with your lender or loan servicer.

You may qualify for both PSLF and Teacher Loan Forgiveness, but you can’t double-dip; the same years of service cannot be counted toward both the Public Service and Teacher Loan Forgiveness programs.

Income-Based Loan Forgiveness

You may also qualify for income-based student loan forgiveness, which can reduce your monthly payments and give you some financial breathing room.

There are 4 different programs for income-based student loan forgiveness, but they all have the following in common:

  • You make reduced monthly student loan payments that are calculated based on your income
  • The remaining balance of your student loans is forgiven after a defined number of payments/years (usually 20 or 25 years, depending on the type of loan)

Other Types of Student Loan Forgiveness

If you are completely and permanently disabled, then you may qualify for Total and Permanent Disability Forgiveness. You’ll have to get a note from the VA, social security administration, or your doctor. Then you can apply to have your student loans discharged.

You may also qualify for loan forgiveness under other programs, like the Borrower Defense to Repayment Program. This program forgives loans made for classes at schools guilty of illegal or fraudulent activities, like ITT Tech or Corinthian Colleges.

Should I switch servicers?

No, you shouldn’t switch servicers if you’re just trying to qualify for loan forgiveness. Switching servicers won’t change your ability to qualify for student loan forgiveness and can be a complicated process.

You should, however, make sure you stay educated about all of your student loan forgiveness options. Even though Navient agreed to retrain their staff and provide other borrower resources, you still can’t count on them to make sure you know about your forgiveness eligibility.

Other options for loan repayment

If you can’t afford your student loans, but you don’t qualify for loan forgiveness, there are other ways to pay less than what you owe. You don’t have to win a lawsuit to have hope for your loan situation!

Student loan repayment options may include:

  • Settlement: Your lender can agree to accept a lump sum that’s less than what you owe if you’re in default.
  • Forbearance: If you’re going through economic hardship, you can apply to your servicer for forbearance, during which you won’t have to make payments.
  • Deferment: If you’re in school at least half-time, are actively serving in the military or Peace Corps, or are unemployed, you can apply to have your payments deferred.
  • Consolidation: You can lump your student loans into one larger loan, potentially at a lower interest rate or for an extended period. I recommend options like SoFi, CommonBond, or LendKey.
  • Income-Driven Repayment: In this plan, your monthly student loan payments are capped out at a certain percentage of your income. The figure will usually fall between 10-20%, depending on the program.

Will Navient settle student loans? Navient will settle private student loans that are in default. However, Navient won’t settle federal student loans because they are servicing your loan on behalf of the Department of Education.

To settle, you’ll have to work directly with the collection agency that has your defaulted loan. You typically cannot settle any student loan in good standing.

Want to know more about loan forgiveness?

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