Longstanding problems with student loans
As millions of borrowers struggle to stay current on their student loans, a new lawsuit filed against the nation’s largest student loan servicing company could provide some relief.
The suit, filed this month by Pennsylvania Attorney General Josh Shapiro against Navient Corp. and a Navient subsidiary could affect thousands of borrowers in the Keystone state.
But the legal battle, which could take several years to play out, also bears watching by anyone who has student loans serviced by the company and who has run into problems with repayments. Also potentially affected are some of those who borrowed from Sallie Mae; Navient is an offshoot of Sallie Mae.
According to Bloomberg News, nearly half of the nation’s $1.5 trillion student loan tab is serviced in Pennsylvania. Some of that work is performed at Navient’s loan servicing center in Wilkes-Barre, Pa.
Whatever the outcome, the lawsuit highlights some longstanding problems in the student loan repayment system: Many borrowers aren’t sure how many loans they have, how to pay them back correctly under the system and how to use programs that can help when there are problems repaying the full amount.
The ramifications of being behind or in default could negatively affect a borrower’s credit record for years, and make it difficult and costlier to take out a mortgage or a car loan, get favorable terms on credit cards and obtain financing to start a business.
Student loan servicers such as Navient are the companies borrowers make payments to every month. It can be different than the company that lent the money originally.
The Pennsylvania suit (available at www.attorneygeneral.gov) centers on allegations that, among other things, Navient:
Steered too many people into shortterm payment plans that postponed their bills but accrued more interest on their debt. This is in contrast to repayment programs tied to a borrower’s income that can mean lower monthly bills and eventually lead to loan forgiveness.
Increased its “misleading subprime lending, while disregarding evidence that these loans would likely default at extraordinarily high rates.”
Navient, in a statement, said it complied “with the rules that govern the student loan program as set by Congress and the Department of Education.”
The Pennsylvania case is similar to suits filed against Navient this year by the Illinois and Washington attorneys general. In those cases, state officials had teamed with the federal Consumer Financial Protection Bureau in a lengthy investigation into Navient’s loan servicing practices. What’s the solution?
Whether your student loan is serviced by Navient or another company, borrowers should check their account at least once a year to make sure their loans are being serviced correctly.
If you’re unsure of your loan servicer, log onto your loan account through the federal National Student Loan Data System (www.nslds.ed.gov/nslds/nslds_SA/).
Borrowers also bear some responsibility to learn about the loan repayment options and their plusses and minuses. Don’t assume that the servicing company will always give you clear instructions. Do some homework so you’ll know the questions to ask.
Experts also recommend that borrowers request an amortization schedule from the servicing company, which will show when the loan will be paid off based on the current repayment schedule.
In addition, check your credit report to see all your debts and whether the information is correct. You are entitled to a free credit report every year from each of the three main credit agencies. If there are mistakes and they are not being corrected, file a complaint with the Consumer Financial Protection Bureau at www.consumerfinance.gov.