By Charlene Crowell
In February 2017, the Consumer Financial Protection Bureau (CFPB) sued Navient Corporation and two of its subsidiaries for allegedly using shortcuts and deception to illegally cheat 12 million borrowers out of their rights to lower loan repayments. These practices, according to CFPB, led to an additional $4 billion in borrower costs.
Forbearance is only one option available to borrowers repaying their student loans. While other options less costly to borrowers like income-based repayment were available, Navient’s widespread use of forbearance boosted corporate profits by minimizing time spent advising distressed borrowers.
Navient’s profit-enhancing measures came at a great expense to borrowers. For example, three-years of deferment on $30,000 in student loans would cost a borrower an additional $6,742.
A few weeks later and in response to CFPB’s lawsuit, the Education’ Department’s Federal Student Aid (FSA) division audited Navient from March 20-24, 2017, and later produced a report of its findings on May 18, 2017.
But the audit remained secret until late November this year when the investigative expertise of Associated Press, aided by U.S. Senator Elizabeth Warren (MA), finally led to public disclosure of its devastating findings. Rather than incur the wrath of consumers nationwide, and/or appear to support the CFPB or any of the multiple state attorneys general who also sued Navient, the Education Department never made the critical audit public.
As journalists would say, this story has legs: A Cabinet secretary allowed a federal contractor to act as if a key public agency worked for a private company. Additionally, audit findings hidden for a year from the public today impact 44 million student loan borrowers.
The one encouraging development in this still-unfolding scenario is that a U.S. Senator is still waging an effort to protect consumers. In a November 13th letter this year from Sen. Warren to Navient’s President and CEO, the Massachusetts Senator was justifiably direct.
“This report bolsters allegations that Navient illegally cheated struggling student borrowers out of their rights to lower repayments…This finding is both tragic and infuriating, and the findings appear to validate the allegations that Navient boosted its profits by unfairly steering student borrowers into forbearance when that was often the worst financial option for them.”
My own review of the report’s hidden findings by the audit’s six-member on-site review team uncovered how Navient not only failed to advise student loan borrowers of all available options to repay their loans but believed that its servicing contract with the Department of Education did not require the firm to do so.
A section of the report entitled, ‘Servicer Response’ states in part: “We disagree with 168 of the 228 servicing opportunity determinations (call review and servicing history review)….Nor are we aware of any requirement that borrowers receive all of their repayment options – IDR, deferment and forbearance – on each and every call…If FSA chooses to require all servicers to discuss IDR to all borrowers on all calls or to require all service representatives follow a common call flow, specific requirements should be provided in an approved Change Request.”
That’s a lot of corporate nerve.
Navient is supposed to work for the Department of Education, and by extension, the American people. Further, if Secretary DeVos allows this major contractor to shape what will or will not happen on her watch, what kind of public steward of taxpayer dollars is she?
The FSA findings give even more credence to the earlier CFPB investigation undertaken before filing its Navient lawsuit. CFPB learned that many of the borrowers that incurred excessive charges included military veterans who became disabled during their service to the country. Federal law provides that military veterans whose disabilities were incurred during service to the country are entitled to loan forgiveness.
Navient also holds title to a related and dubious distinction: More consumers filed complaints about Navient than any other student loan servicer. Complainants identified dealing with the servicer or lender as the key issue, compared to nearly half at 34 percent whose problems were based on an inability to pay their loans.
“At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs,” said then-CFPB Director Richard Cordray at the time the lawsuit was filed. “Too many borrowers paid more for their loans because Navient illegally cheated them.”
“Too many Americans are struggling to make their student loan payments every month,” said Whitney Barkley-Denney, a policy counsel specializing in student lending with the Center for Responsible Lending. “While the Department of Education has created programs to help make monthly payments more affordable, those programs only work if servicers are actually helping eligible borrowers access them. Servicers aren’t merely debt collectors – they can be a borrower’s lifeline to financial stability.”
Navient still has a chance to set its record straight. Sen. Warren’s letter requests a written reply to the litany of concerns by December 4.
Charlene Crowell is the Communications Deputy Director with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.