Department of Education, Navient: Don’t Rely On Loan Servicers

Michael Lux Blog, News, Student Loans 0 Comments

Both the Department of Education and Navient, in separate lawsuits, have argued that borrowers should not rely upon information provided by their loan servicer.

In one lawsuit, the Consumer Financial Protection Bureau is suing Navient for “failing borrowers at every stage of repayment.”  Even though Navient holds itself out as a loan servicer whose “priority is to help each of our 12 million customers successfully manage their loans in a way that works for their individual circumstances,” in court, Navient takes a dramatically different position.  In response to the CFPB lawsuit Navient claims that, “There is no expectation that the servicer will act in the interest of the consumer.”  Instead, Navient claims they are simply responsible for debt collection.

In an unrelated lawsuit, four federal loan borrowers are suing the Department of Education due to its retroactive cancellation of certified Public Service Student Loan Forgiveness payments.  The four plaintiffs had previously received letters from their loan servicer indicating that they were on the right repayment plan and that they were employed by a qualifying employer for purposes of Public Service Loan Forgiveness.  In response to the lawsuit, the Department of Education has argued that borrowers could not rely upon their servicer, FedLoan Servicing, “to say accurately whether they qualify for debt forgiveness.”

US taxpayers are owed over a trillion dollars by student loan borrowers.  Taxpayers also fund massive contracts to loan servicers such as FedLoan Servicing and Navient to collect the debt and aid borrowers in repayment.  On the Department of Education’s website, borrowers are told that “A loan servicer will help you manage the repayment of your federal student loans—for free.”  Borrowers are likewise instructed by the Department of Education to contact their servicer with specific questions about their loans.

Loan Servicer Accountability

The issue of student loan servicer accountability is not a new issue.  For years lenders have avoided answering questions via email.  It is much harder for a borrower to prove they were told information over the phone compared to providing an email.

Customer Service Representatives are not required to have a specialized background in finance, and the quality of their training is suspect.  It is for this reason that suggestions made on this site often include the tip that borrowers should call their servicer multiple times to make sure they are speaking to someone knowledgeable and getting accurate information.

When inaccurate information is provided by a loan servicer, borrowers may receive an apology for being told incorrect information, but rarely with the loan servicer retroactively go back and correct mistakes made.  All too often borrowers rely upon bad information for years and are left with no recourse to correct the mistake.

The Borrower’s Dilemma

The recent arguments made in court by the Department of Education and Navient confirm what many borrowers have suspected for years: loan servicers cannot be relied upon for accurate student loan information.

The problem for borrowers is that in most cases, the loan servicer is the only source of information available.  Other websites and entities may provide tips or suggestions, but student loan repayment is an endeavor where the loan servicers often get the last word.  Deadlines, calculations, and fees are all determined by the loan servicer.  Repayment eligibility is governed by statute, but it is the loan servicers who decide who qualifies.

Borrower’s are left in a situation where they have to interact with loan servicers, they have to get information from loan servicers, but they can’t trust what they are being told.

The Bottom Line

Federal student loans are a trillion-dollar government enterprise and the people responsible for it, the Department of Education and loan servicers like Navient, say borrowers cannot rely on what they are being told.