As if the entire system of student loan payments isn't already enough of a headache, the Consumer Financial Protections Bureau and state attorneys general in Illinois and Washington have now filed lawsuits against Navient, the largest servicer of student loans in the US.
Despite accusations of "extensive mistakes and violations," Navient has denied all wrongdoing, New York Times reports.
The corporation, which is based in Wilmington, Delaware, insists it maintains "a well-established, superior track-record of helping student loan borrowers succeed in repayment."
However, the ways in which Navient has been conducting its business say otherwise.
Here are the seven ways the company may have duped you into the wrong payment plans:
1. Dissuading you from an income-based repayment plan.
When you're first setting up your student loan payments, choosing a plan can seem ridiculously complex and feel really overwhelming.
Most borrowers are actually eligible for an income-driven repayment plan, which is pretty much exactly what it sounds like: the plan sets your monthly student loan payment at an amount that's affordable based on your income and family size.
Except, as you might guess, this kind of plan requires more paperwork, AKA more work for Navient.
According to the lawsuits filed against them, the corporation has been "systematically deterring" its customers from enrolling in income-based payment plans - instead of steering them toward other (simpler) options.
In a legal response to the lawsuit, Navient wrote in its filing,
There is no expectation that the servicer will 'act in the interest of the consumer.'
Oh, thanks, guys! That's certainly reassuring.
2. Misleading deadlines and notifications for those enrolled in income-based repayment plans.
If you are enrolled in an income-driven repayment plan, you're supposed to send in paperwork every 12 months to renew that particular application.
If you don't, you're automatically dropped from the payment plan, and you'll likely find yourself with higher monthly payments and lost interest subsidies - all with little to no warning.
The lawsuits against Navient alleged the company failed to alert its customers about the deadline for renewal, as well as the repercussions for not renewing.
Between July 2011 and March 2015, approximately 60 percent of Navient's customers enrolled in this payment plan did not renew their applications.
Now, why in the world would people intentionally cost themselves more money?
Well, Navient kind of dropped the ball on this one. For at least three years, their renewal notices were extremely vague, with email subject lines like "Your Sallie Mae Information" and "New Document Ready to View" (sound familiar?).
Plus, the notices didn't include any actual due dates for renewal application submissions.
Then, in March 2015, Navient changed the subject lines in these emails to read, "Your Payment Will Increase Soon!"
And, wouldn't you know it, the renewal rate quickly doubled after that! Who woulda thunk it?
(Me. And probably everyone. We all woulda thunk it.)
3. Mishandling payments.
It would seem handling student loan payments correctly is the very basis of Navient's purpose as a corporation, but apparently, even that's a little too difficult a skill for it to master.
According to the lawsuits, Navient often made mistakes in processing incoming payments, especially those made by check.
The Consumer Financial Protections Bureau alleged when borrowers sent in lump-sum payments with additional instructions to pay off a specific loan, Navient would often just divide the payment among all of the loans in the borrower's account, effectively ignoring the individual's instructions.
Apparently, the corporation's mail-reading equipment wasn't sophisticated enough to detect the written notes, nor did it have the technology to catch these errors and stop them from recurring.
In one customer's case, which was cited in the Illinois state lawsuit, Navient “acknowledged the repeated errors that occurred each month but offered no solutions.”
You had one job, Navient. ONE JOB.
4. A misleading system for releasing co-signers.
A co-signer is basically a person who legally agrees to be held accountable if a loan is not properly repaid.
Navient allows a borrower to release a co-signer from a loan once a minimum number of "consecutive, on-time payments" have been made (usually 12 payments).
However, Navient allegedly created obstacles that made these releases "deceptively difficult" to obtain.
For example, if a borrower has a $100 loan due one month, they can choose to send in $200, thus opting to skip their next monthly payment by applying the extra money toward next month's bill.
But, under Navient's system, if someone didn't make a payment one month because the bill was literally $0 (after overpaying for the previous month's bill), the corporation treated this as a failure to make "consecutive" payments and reset the borrower's consecutive-month payment count to zero.
None of this was made clear to customers, according to the lawsuits, and many were left scratching their heads as to why their co-signer release requests had been denied.
5. Misrepresenting the "benefits" of loan rehabilitation.
Loan rehabilitation gives you the opportunity to clear the default on a defaulted federal education loan and regain eligibility for federal student aid - but you can only do this once.
However, according to the consumer bureau, Navient's debt-collection subsidiary, Pioneer Credit Recovery, “systematically misled” borrowers about the positive effects of rehabilitation on their credit reports, and the company wasn't clear about how much of the defaulted loan's collection fees would be forgiven.
6. Misleading information about disabled borrowers to credit bureaus.
In the event a borrower is afflicted with "a total and permanent disability," the individual is permitted to have his or her federal student loans discharged.
In turn, the lender is supposed to report these circumstances to credit bureaus, in the form of a specific code.
Navient again dropped the ball by using a different code, one which incorrectly indicated the loan had defaulted, the lawsuits alleged.
For the disabled borrowers, this essentially meant a big, ugly and difficult-to-remove stain on their credit reports, leaving many (including military veterans injured during their service) unable to obtain credit cards, mortgages and other loans.
7. Making private, subprime loans to students it knew were likely to default.
According to Illinois and Washington state attorneys general, Sallie Mae (Navient's predecessor company from which it split off in 2014) made several private, subprime loans to borrowers it knew were likely to default.
Sallie Mae's private loans often went to students attending for-profit schools with low graduation rates.
The motive behind this was basically to establish a reputation for schools' "preferred lender" lists.
So, yes, it was kind of like it was trying to win a popularity contest.
At just one school, the company actually calculated an expected default rate on private loans at a ridiculous 70 percent.
While Sallie Mae can afford to turn a blind eye and write off the bad debt, borrowers in this situation are left on the hook for billions of dollars.
Citations: The Accusations Against Navient (The New York Times), Income-Driven Repayment Plans for Federal Student Loans (Federal Student Aid), THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (Navient), Student Loan Rehabilitation (FinAid), Total and Permanent Disability Discharge (Federal Student Aid)