Student loan vendor faces lawsuit, allegations of deceitful collection practices
- Student loan servicer Navient is at the center of a federal lawsuit and faces allegations that it charged borrowers extra in fees and misrepresented options for making lower payments.
- According to the Consumer Financial Protection Bureau, the loan vendor added nearly $4 billion in extra finance charges to outstanding student accounts in forbearance between 2010 and 2015.
- The suit also claims that Navient reported the discharged loans once held by disabled students and veterans as defaulted accounts, which caused consequences to borrower credit reports.
While there is little that institutions could have done to prevent the damage allegedly done by a loan servicing organization, loan awareness and information can be a part of the collegiate financial aid exit interview. While colleges do work to ensure that students understand the institution's risk associated with non-payment from former students, schools can support repayment by helping students to better understand loan terms, fees and negotiation tactics.
Leaders should also be concerned with potential limits this suit could create within the Department's student lending program, which could result in open access schools or other institutions with high default rates being removed from funding in order to prevent massive fraud from students or collectors.
- Consumer Financial Protection Bureau CFPB sues nation's largest student loan company Navient for failing borrowers at every stage of repayment