Class Action Targets Student Loan Co.'s Alleged Forgiveness Obstructions
The suit claims Navient's practices diverted otherwise eligible borrowers from taking full advantage of federal loan forgiveness programs aimed at helping public-sector and nonprofit workers.
October 03, 2018 at 05:53 PM
5 minute read
Like so many teaching professionals, New York City public school teacher Melissa Garcia says she took out loans to help meet the expense of earning a master's degree. And like so many students everywhere, those loans were ultimately serviced by Navient, the legacy student loan behemoth.
Born out of the privatization of its predecessor Sallie Mae, Navient held a portfolio of nearly $88 billion worth of federally backed student loans at the end of 2016. Garcia says that she trusted Navient to provide truthful, accurate information about her loan repayment options, specifically because, as a teacher, she hoped to become eligible for the federal Public Service Loan Forgiveness program.
The program is marketed to employees of government and not-for-profit entities who make 120 monthly payments, under specific conditions, who are then potentially able to have their remaining balance forgiven.
According to a complaint in a new class-action suit filed in Manhattan federal court Wednesday, Garcia and eight other borrowers working in public service positions that they hoped qualified them for forgiveness later claim Navient failed in its duties to help them and others remain in good standing on their loans.
Garcia claims that over the years the loan servicing company made suggestions that hurt her ability to eventually realize loan forgiveness. She claims Navient's suggestion in 2013 to consolidate her loans would help her save money. In reality, she alleges, the consolidation caused her to lose 37 qualifying payments she'd make toward to PSLF program.
A year later in 2014, Garcia asked Navient about her eligibility for loan forgiveness, and she was told by the company that PSLF would be her best bet. Yet when she told Navient she'd completed her employment certification form for the program, she claims the company told her not to submit the form until she was through with all 120 qualified payments.
According to the complaint, Navient's suggestion hid a self-serving motive. Once the employment certification form is submitted, loans are no longer serviced by Navient, which means a loss of servicing fees. By not submitting the form, she missed an opportunity to qualify for PSLF, Garcia claims.
These are among the numerous complaints made by the plaintiff's against Navient, which they claim has been misleading borrowers in ways that help Navient's bottom line but do substantial damage to borrowers' prospects for receiving loan relief in the future.
“Since 1983, the cost of higher education has risen more than 700 percent and over 40 million people have taken out student loans totaling over $1.5 trillion,” Selendy & Gay name attorney Faith Gay, who leads the plaintiff's legal team, said in a statement. “But Navient has obstructed loan forgiveness at alarming rates, with horrifying effects on borrowers, their families and communities.”
A spokeswoman for Navient declined to comment on the suit.
Recent reports suggest that those seeking forgiveness under PSLF are, at the very least, struggling to overcome the law's hurdles. According to those reports, PSLF, which is just now seeing the first wave of potentially eligible students seek forgiveness, has a rejection rate of 99 percent. Out of the 28,000 loan borrowers who submitted forgiveness requests as of June 30, only 300 have been approved.
As a loan service provider, Navient has a material role in assisting borrowers, something made clear through its contract with the U.S. Department of Education, according to the complaint. This holds for guiding those seeking assistance navigating the PSLF process. As the complaint notes, through its company leadership and public statements, Navient presents itself as being committed to assist borrowers.
The reality, the complaint claims, is that Navient is incentivized to prevent borrowers from enrolling in PSLF, as a way to keep servicing fees coming to it and its profits on an upward trajectory.
“Navient places Plaintiffs, along with those similarly situated, in imminent danger of future irreparable harm by continuing its pattern of providing false information to borrowers,” the complaint states.
The suit brings 15 causes of action against the company, including breach of contract and fiduciary duties, negligent misrepresentation, and violations of consumer laws in four different states, including New York and California.
The suit is also being supported by the American Federation for Teachers, which says many of its members are being harmed by Navient's practices.
“We are proud to be represented by the powerful women-led team at Selendy & Gay, a firm that shares AFT's commitment to the public good,” ATF president Randi Weingarten said in a statement.
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