Navient got a lot of media attention back in January when the Consumer Financial Protection Bureau first filed their lawsuit against them. Two states — Washington and Illinois — joined in and filed their own lawsuits soon after.

Since then, Navient has filed to get all three lawsuits dismissed. So far, two judges have rejected the dismissal requests, leaving only the judge in Illinois still deliberating. The Washington and CFPB cases will go to trial, but some people suspect that Navient will settle before that.

Why the Navient Lawsuit Matters

Navient is the largest student loan servicer with a $300 billion student loan portfolio servicing 12 million borrowers. They were on the short list for the position of sole federal student loan servicer before that competition was canceled. If the move to a single servicer is revisited, Navient will likely jump back to the top three.

Federal student loan borrowers rely on communication and cooperation from their loan servicer. When that doesn’t happen, it jeopardizes the financial security of the more than 44 million borrowers in America. Bad advice, poor communication, and sloppy practices form the basis of the Navient lawsuit filed in January. Specifically, CFPB accused Navient of  

  • Incorrectly applying payments
  • Steering borrowers away from cost-saving repayment programs and into forbearance where interest would continue to accrue
  • Failing to effectively remind borrowers of annual deadlines to remain in cost-saving repayment plans
    • The email reminders they did send about recertification had no urgency and merely suggested that the borrower check their account for a new message.
  • Overcomplicating the process to release a co-signer
    • Releasing a co-signer requires a set amount of on-time payments; Navient systems reset that counter if the borrower paid extra to get ahead of schedule.
  • Misreported default status of veterans
    • Veteran borrowers complained that their accounts were mislabeled and reported to the credit bureaus as defaulted, harming their credit.

Recent Activity

Navient’s initial response to the lawsuit was that their duty is to collect money for the federal government, not to help consumers: “There is no expectation that the servicer will ‘act in the interest of the consumer.’”

U.S. District Judge Robert Mariani, the judge who rejected the request for dismissal of the CFPB lawsuit, pointed out that Navient’s statement directly contradicted other statements in their CEO’s blog: “At Navient, we make it a priority to educate our federal borrowers about income-driven options. … These programs are our primary tool in helping borrowers avoid default. As a result, we are a leader enrolling borrowers in these programs.”

We’re still waiting to hear whether the request for dismissal in the Illinois lawsuit will be rejected like the other two.