Statement by SBPC Executive Director Seth Frotman on New Evidence Revealing Navient Executives’ Plot to Cheat Borrowers

Unsealed Court Documents Reveal the Depth of Navient Abuses

September 18, 2019 | WASHINGTON, DC —Newly unsealed court documents reveal executives at the nation’s largest student loan company orchestrated a predatory scheme to place borrowers in high-cost repayment options to boost corporate profits. Reliance on these high-cost options, known as “forbearances,” resulted in more than $4 billion in unnecessary interest charges passed on to borrowers, according to lawsuits filed by federal and state enforcement officials.

Newly unsealed documents: https://protectborrowers.org/wp-content/uploads/2019/09/CFPB-Reply-to-Motion-for-Summary-Judgment-w-Exhibits.pdf

Student Borrower Protection Center Executive Director Seth Frotman released the following statement: “The evidence unsealed today in federal court confirms that Navient’s practices that added billions of dollars of debt to struggling borrowers emanated from the top echelon of the company. This follows a decade-long pattern of Navient ripping off servicemembers, disabled veterans, teachers, and American taxpayers. The time has come for policymakers to admit this company’s practices are predatory and corrupt—it should not be given a single additional taxpayer dollar.”

Newly unsealed court filings in CFPB v. Navient reveal that company executives executed a calculated strategy to deny borrowers their rights. In a newly-public internal strategy memo, one Navient executive wrote:

Our battle cry remains “forbear them, forbear them, make them relinquish the ball.” Said another way, we are very liberal in our use of forbearance once it has been determined that a borrower cannot pay cash or utilize other entitlement programs. Generally speaking, out of every 10 resolved ED borrowers, 8 will forbear, 1 will pay cash, and 2 will use deferment or some other entitlement. That mix is likely to change over time as we improve our ability to communicate the benefits of and fulfill other programs such as “Income Based Repayment.”

Background: Overuse of Forbearance

When student borrowers run into difficulties making payments, student loan servicers may choose to offer forbearance, which postpones loan payments for a set period of time. But under forbearance, the loan continues to accumulate interest and can become an expensive option over time. Borrowers experiencing financial hardship are typically eligible for income-driven repayment plans, which may be a cheaper option for borrowers over the long term.

The correspondence unsealed today in court reveal that Navient’s strategy to steer borrowers into forbearance was calculated by senior executives to deceive borrowers in order to boost profits. Rather than investing in customer service and providing borrowers with information about income-driven repayment plans, lawsuits allege that Navient steered borrowers to higher-cost options to reduce call times and increase profits. In fact, the Consumer Financial Protection Bureau alleges in its lawsuit against Navient that between 2010 and 2015 Navient’s predatory servicing practices added nearly $4 billion in interest to student borrowers’ loans through the overuse of forbearance. 

In response to the allegations that Navient systematically steered borrowers to high-cost repayment arrangements in order to boost company profits, Navient attorneys previously told a federal judge “there is no expectation that the servicer will act in the interest of the consumer.”