Potentially millions of teachers, social workers and other public servants wasted money repaying loans because a major student-loan company obstructed access to debt forgiveness to which they were entitled, a new lawsuit charges.
The class-action suit filed Wednesday against Navient by borrowers who are eligible for Public Service Loan Forgiveness, claims that the company provided these public servants with wrong information, extending the amount of time they would need to wait before having their loans discharged under the program and causing them to spend money unnecessarily on their debt.
The borrowers also allege that Navient’s company policies incentivized this behavior. The suit, funded by the American Federation of Teachers, claims that Navient encourages its staffers to spend just minutes on the phone with borrowers, but counseling borrowers on their options can take significantly longer.
The suit also alleges that Navient had reason to make it more difficult for borrowers to qualify for PSLF — once a borrower is deemed eligible for the program, their loan is moved to another company — and that Navient wanted to ensure they continued to receive the money associated with the account.
Navient “purposefully and systematically trapped teachers, nurses and other public-service workers under a mountain of student-loan debt rather than providing them the opportunities to reduce this debt through the public service loan forgiveness program,” Randi Weingarten, the president of AFT said on a conference call with reporters.
A representative from Navient declined to comment on the allegations.
The public loan forgiveness program has faced a rocky start
The suit is the latest indication of the challenges borrowers face accessing PSLF. Roughly 28,000 borrowers have applied so far to have their loans discharged and just 96 were approved.
The program, which was signed into law in 2007, allows public servants to have their loans forgiven after 10 years-worth of payments. But it appears at least thousands of borrowers have been tripped up by the eligibility criteria, which require borrowers have the right type of federal student loan, work in the correct type of job (the government at all levels and only some nonprofits), be in the correct repayment program and make 120 qualifying payments.
What’s more, this suit is just one of many allegations from borrower advocates that student-loan servicers have thrown up obstacles along public servants’ road to forgiveness.
Seth Frotman, the student-loan ombudsman at the Consumer Financial Protection Bureau until August, told reporters on the call that during his work at the bureau he encountered countless borrowers hoping to qualify for PSLF, who had their dreams dashed by “inexcusable servicing breakdowns” and “lies told to them by their loan servicer.”
‘I didn’t need a handout — I needed a little bit of guidance’
Kathryn Hyland, a New York-based public school teacher alleged in the suit that she believed she was on track towards loan forgiveness for three years, thanks to information she received from Navient. She later learned that the payments she made during that time didn’t count towards forgiveness because she had the wrong type of federal loan — a problem she could have fixed had she known about it.
Melissa Garcia, another New York-based public school teacher, claims in the suit that she was misled by Navient on multiple occasions. At one point, the company advised her to consolidate her student loans, which restarted the clock towards debt forgiveness and caused her to lose 37 payments that would have counted towards that goal. In addition, she alleges that Navient advised her to enter a repayment program that didn’t qualify for PSLF, despite calling to ask about staying on track towards forgiveness.
Megan Nocerino, a Florida middle-school teacher, told reporters on the call about reaching out to Navient for help managing her debt while she was caring for her ailing son, and being steered towards forbearance — a status that temporarily pauses payments and progress towards forgiveness and during which interest continues to build. That happened even though she qualified for PSLF and there are repayment plans available that would maintain her eligibility and make her monthly payments more manageable.
“At that moment, I just needed a little bit of help — I didn’t need a handout — I needed a little bit of guidance and a little bit of understanding,” she said on the call.
A symptom of a larger problem
The types of challenges public servants face accessing PSLF provide a window into larger systematic issues with the student-loan program that could become more pronounced as more borrowers become eligible for other, less narrow, debt-relief programs, said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
“The public service loan portfolio is kind of like the canary in the coal mine,” Yu said. Many of these borrowers may have graduate degrees and perhaps even received advice from their schools or employers about accessing the program and yet they’re still struggling. That indicates that as borrowers with perhaps fewer resources become eligible for debt relief they too may not receive it when they’re entitled, Yu said.
“The fundamental confusion about the student-loan program is a lot deeper than someone didn’t read the fine print,” she said. “To access a lot of programs under the federal loan program you just need to badger your servicer.”
Though advocates complained during the Obama administration that servicers weren’t doing enough to help borrowers, Weingarten told reporters on the call that the Betsy DeVos-led Department of Education is only making this situation worse.
During DeVos’s tenure, the Department has worked to shield student-loan companies from state consumer protection laws. In addition, the agency has tried to block the implementation of Obama-era rules aimed at protecting borrowers from predatory colleges and trying to make them whole when they’re misled by their schools.
“In every angle in which they are operating they’re actually being a friend to lenders and a foe to borrowers,” Weingarten said.
The Department of Education didn’t immediately respond to a request for comment.
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Source : MTV
