Five Things We Learned About Navient’s Plot to Cheat Student Borrowers

By Mike Pierce | September 19, 2019

Navient is the nation’s largest student loan company, collecting payments on more than $300 billion in loans owed by more than 12 million borrowers, including tens of billions of dollars in private and federal student loans owned by the company itself.

Over the past two years, lawsuits have been brought against Navient by the Consumer Financial Protection Bureau and state attorneys general in Illinois, Washington, Pennsylvania, California, and Mississippi — all charging the company with rampant student loan servicing abuses. Predatory practices like failing to correctly apply borrowers’ payments; steering struggling borrowers into higher-cost plans; and hurting the credit of disabled borrowers, including injured veterans, by reporting errors to credit reporting companies. Practices that ruin financial lives and hurt people.

While law enforcement from coast to coast have diligently prosecuted their cases, Navient has tried to convince lawmakers, policymakers, shareholders, and anyone else who will listen, that this is all just a big misunderstanding.

When asked about the lawsuits, Navient CEO Jack Remondi, “it’s just false narrative, and really doesn’t show a lot of appreciation for how a servicing operation works.”

But yesterday, over the objections of Navient’s attorneys, a federal judge unsealed a trove of new documents revealing a years-long, coordinated effort by company executives to cheat student loan borrowers out of their rights.

In other words, now we have the receipts, and they reveal Navient’s scheme to steer borrowers into a high-cost repayment option known as “forbearance” — a plot that has cost student loan borrowers more than $4 billion in unnecessary interest charges. Below are five key takeaways from the unsealed evidence.  

1. Forbearance steering was Navient’s strategy

In a June 2010 internal strategy memo written by a senior Navient executive, the company lays out its strategy for handling borrowers in distress. It’s clear from the memo that the company was VERY focused on protecting its bottom line, but had no regard for consequences to  borrowers. To make sure that Navient executives never lose track of the plan, a Senior Vice President for Customer Service made up this catchy refrain:

This explains *why* CFPB enforcement attorneys found a corporate culture across the company that drove Navient personnel to push forbearance over IDR.  As CFPB explains, even when Navient supervisors identified instances where a borrower was steered into forbearance, “a [customer service] representative’s conduct would not be written up in any way or lead to any sort of warning.”

2. Borrowers’ rights come second to Navient corporate profits

In the same memo, the senior executive makes it clear to Navient higher-ups that the company isn’t merely interested in doing what is best for its customers.  It is official company policy that borrowers’ rights are only a priority when they align with Navient’s financial interests.  

This should be no surprise coming from a company that once told a federal judge “there is no expectation that the servicer will act in the interest of the consumer.”

3. In 2009, Congress gave borrowers the right to an affordable loan payment. Three years later, Navient customers were still waiting.

In a deposition taken by CFPB, a former Navient call center supervisor confirmed that Navient representatives were not trained to counsel borrowers about their right to affordable payments guaranteed under federal law (Income Driven Repayment or IDR)  prior to 2012, three years after Congress gave borrowers the right to affordable loan payments.

4. Navient CEO Jack Remondi was repeatedly warned that Navient customers were unable to invoke their right to affordable loan payments.

CFPB enforcement attorneys identified at least five occasions in the documents when Navient personnel alerted CEO Jack Remondi that Navient customers were placed into high-cost repayment options instead of income-driven repayment.

5. Navient executives failed to obtain a basic understanding of borrowers’ rights and Navient’s duties under the law.

CFPB enforcement attorneys explain that Navient relied on forbearance for years, failing at every step to provide borrowers with an effective means to access their right to affordable payments guaranteed under federal law through IDR. . This includes the revelation that “the head of all four of Navient’s call centers stated that he had not been aware, during most or all of his tenure from 2011 to 2012, that IDR was even an option for borrowers who could not afford to make payments.”

Thanks to the enforcement attorneys at CFPB, the public is finally getting a close look at how Navient’s “servicing operation works.”  I bet this wasn’t quite what Jack Remondi had in mind.

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Mike Pierce is the Policy Director and Managing Counsel at the Student Borrower Protection Center. He is an attorney, advocate, and former senior regulator who joined SBPC after more than a decade fighting for student loan borrowers’ rights on Capitol Hill and at the Consumer Financial Protection Bureau.