Student loans: What new lawsuits mean for your loans
If you have student loans, there’s a “decent chance” you’ve been cheated, said Minda Zetlin in Inc.com. Navient, the nation’s largest student loan servicing company—with more than 12 million accounts—has been accused of ripping off borrowers, in a series of bombshell lawsuits filed last week by the Consumer Financial Protection Bureau and the states of Illinois and Washington. The student loan giant allegedly cost borrowers as much as $4 billion in unnecessary interest charges by steering them into inappropriate repayment programs that were cheaper for the company to administer. In other cases, Navient allegedly “lost” or misapplied payments for borrowers who paid off their loans in advance, causing them to rack up huge balances, and ignored other borrowers’ requests for help. The company has denied the allegations, saying it’s a victim of the federal government’s hopelessly byzantine student loan rules. Either way, if you have student debt, “now is a good time to get the facts straight” about your loan status.
“Staying out of trouble with a student loan servicer starts with two questions: How much do you owe, and to whom?” said Ron Lieber in The New York Times. Those are often tricky to answer, because the original lender is rarely the company that collects payments. For federal loans, simply sign up for an online account through the National Student Loan Data System. For private loans, check your credit report. If you have federal loans, you may be eligible for an income-based repayment plan that reduces your monthly payments to a more affordable amount. This is what got Navient in trouble. Regulators say the loan servicer didn’t do enough to inform borrowers when they were eligible for discounts and didn’t properly inform those who were enrolled that they had to reapply every year. Instead, Navient allegedly pushed borrowers into short-term “forbearance” programs, which allow borrowers to put off payments but don’t stop interest from accruing. You should avoid these programs whenever possible.
People who feel they’ve been wronged “have a few options for what to do next,” said Samantha Masunaga in the Los Angeles Times. Borrowers can file a complaint with the Consumer Financial Protection Bureau, which may be able to help them resolve their issue. Those who feel they were wrongly steered into forbearance can call Navient and request a change. “Borrowers also can go to StudentLoans.gov to apply for an income-driven repayment plan or to consolidate other federal loans.” But don’t expect a broader crackdown on the student loan industry, said Shahien Nasiripour and Janet Lorin in Bloomberg.com. With the CFPB’s future an open question under President Trump, investors are betting Navient will easily weather the current round of lawsuits. “The day after the election, the company’s stock shot up 17 percent, and even with the lawsuit it’s kept most of that gain.”