Why is Navient Still Charging Interest?

#1 Student loan lawyer

Updated on February 3, 2023

If you have student loans with Navient, you might wonder why your loans are still accruing interest — especially as the payment pause started at the beginning of the Covid-19 pandemic has continued. Navient is still charging interest on your federal student loans because those loans aren’t eligible for the pause on student loan payments and interest. But why?

During the early stages of the coronavirus pandemic, lawmakers passed legislation that froze monthly payments and interest rates for tens of millions of federal student loan borrowers. But the CARES Act didn’t cover all borrowers: For the past three years, those with private student loans, commercially held Family Education Loans, and Federal Perkins Loans have been forced to continue making payments and watch their interest compound.

Related: Is Navient a Federal Loan?

Navient only services these types of student loans. If you have Navient loans, you’re not eligible for the payment pause, and the company may legally continue to charge you interest.

Why are my Navient loans not paused?

Your Navient loans aren’t eligible for the federal student loan payment pause and 0% interest rate period because they are privately-held federal student loans or private student loans, neither of which are held by the U.S. Department of Education.

Only loans held by the Education Department are eligible for this administrative forbearance.

How to stop paying interest on Navient loans

There is a way out. It’s important to know that these loans can be consolidated with the Department of Education. This is the only way to stop Navient from charging interest. This is because consolidation effectively refinances the loans with the federal government.

There are more benefits to doing this, as it makes you eligible for other federal student loan programs that could get you out of debt more quickly— I’ll discuss these below.

This works because a guaranty agency owns your federal loans — most likely Ascendium — and not the federal government. And because the Education Department doesn’t directly own them, the freeze on student loan interest doesn’t apply to them.

Related: FFELP Loan Forgiveness

When you consolidate, the department buys those loans and becomes the new owner. And when that happens, the new consolidation loan becomes eligible for the CARES Act forbearance, which means interest will stop accruing.

To consolidate, you don’t need to work with Navient. Instead, you can use the Federal Student Aid website, StudentAid.gov.

Related: Best Student Loan Consolidation Companies

The drawback to consolidation is that any unpaid interest will be added to your loan balance through a process called capitalization. While this may increase your principal balance dramatically, that cost may be worth it if consolidating leads to your loans being forgiven.

What if I already have an FFEL Consolidation Loan? You can consolidate your loan a second time — even if it’s your only loan.

Learn More: Can You Consolidate Student Loans More Than Once?

More benefits of consolidation

Consolidation won’t just pause the interest on your Navient loan. There has been a lot of noise over the past two years about Navient loans being forgiven. A lot of the hubbub came from the Navient settlement announced in January. In that deal, the company agreed to wipe out $1.7 billion in predatory, high-interest-rate private student loans it made to borrowers it knew had little hope of ever paying the debt back.

Navient has already acted on the settlement and cleared the student loan balances of 66 thousand eligible borrowers. If you still have a balance with Navient today, here are two other forgiveness opportunities you may be able to take advantage of by consolidating your loans with the Department of Education:

PSLF Waiver

Last October, the Biden administration announced it would give service members, teachers, and other public servants shut out of the Public Service Loan Forgiveness Program another chance at debt cancellation. For a limited time, the Education Department will let all payments count toward PSLF, despite the loan program or payment plan. It’s also giving borrowers credit for some time spent in forbearance and deferment.

Related: Do FFEL Loans Qualify for PSLF?

You would qualify for the PSLF Waiver if you worked full-time for the government or a nonprofit organization anytime after Oct. 1, 2007. You must consolidate your FFEL Loans into a Direct Loan to apply for this limited relief. You can do that on studentaid.gov.

Learn More: How to Apply for PSLF Waiver

IDR Waiver & Account Adjustment

You may be convinced that you must pay your loans until you die, but that’s not true. Income-driven repayment plans are available through the Education Department, which lets you pay back only what you can afford for at least 20 years. The amount that remains after you’ve made your final qualifying payment will be written off.

Related: Student Loan Forgiveness After 20 Years

Few people are aware of IDR plan forgiveness, but it has the potential to drastically improve the lives of millions of student loan borrowers in America. This is especially true for those struggling to make ends meet for years.

Normally, you must make at least 240 monthly payments under an income-based repayment option before your loans can be forgiven. For a limited time, though, the department is allowing borrowers a reprieve. It’s using a one-time waiver and account adjustment to credit borrowers for any payments made since taking out the loan, even if their monthly payment was zero or under a non-qualifying repayment plan. Also, the department is giving borrowers credit towards IDR forgiveness for time spent in forbearances and some deferment periods.

Your Navient loans can qualify for the repayment waiver if you consolidate them into a Direct Loan. Once that’s done, the department and your new student loan servicer will review your payment history and tally your total number of payments and eligible deferment and forbearance time.

Learn More: Limited IDR Forgiveness Waiver

But Biden’s cancellation plan isn’t an option

After deliberating for months, President Joe Biden finally announced he would keep his campaign promise and take executive action to offer student borrowers some reprieve. This action will cancel $10 thousand in federal student debt for millions of borrowers who meet income requirements and $10 thousand more for those who received a Pell Grant as undergraduate students.

Millions of people automatically qualify, but most will need to apply for student loan cancellation once the application is released in October. Private student loans are ineligible, including federal loans refinanced with a private lender.

Unfortunately, none of your loans with Navient are eligible for this debt relief program — even if they’re consolidated into a Direct Loan. Due to a policy change, the Education Department prohibited borrowers with privately-held Federal Family Education Loans — i.e., FFELP Stafford Subsidized and Unsubsidized Loans, from qualifying for cancellation.

Learn More: $10,000 Student Loan Forgiveness

Bottom Line

The payment pause doesn’t apply to loans serviced by Navient, which allows them to continue charging interest. You can consolidate these loans into a Direct Consolidation Loan before payments resume in January, which will make them eligible for the payment and interest freeze. This will also enable you to qualify for various temporary forgiveness programs from the Education Department.

 UP NEXT: Navient Loan Forgiveness

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