Lawsuit: Student loan giant failed, cheated borrowers

Such a system will allow student loan borrowers to provide consent for the Internal Revenue Service to share certain information with FSA and its loan servicers for a period of at least five years.

The lawsuit was filed following a multiyear investigation in conjunction with the federal Consumer Financial Protection Bureau and the Illinois Attorney General’s Office.

Navient officials dispute the allegations and claim they are politically motivated days ahead of a new presidential administration. “Litigation can often be long and cumbersome”, said Rohit Chopra, senior fellow at the Consumer Federation of America, and formerly the assistant director and student loan ombudsman at the Consumer Financial Protection Bureau.

And while some of this debt stems from them taking out, you know, a student loan for themselves, the overwhelming majority now come in the form of cosigning where a parent or grandparent is actually taking on debt on behalf of their child or grandchild.

“The number one loan servicer that our borrowers and members complain about is Sallie Mae/Navient”, Abrams said.

The ability to borrow money quickly and easily, paired with a lack of long-term planning, mean too many families are getting loans, Swicegood said. This ultimately costs consumers more interest.

Q: What options for repayment plans exist for struggling borrowers? That forced borrowers with a hike in their monthly payments.

The CFPB’s allegations go back as far as 2010. That is because the plans are based on your annual household income. The benefit of choosing income-based repayment in this situation is that these programs forgive any remaining loan balance after 20 to 25 years, depending on the program. “You’re better off putting your loans in forbearance”.

It’s also worth mentioning that in many cases, thousands of dollars in student loans are issued to 18-year-olds with no credit history, who most likely wouldn’t even be approved for their own cell phone plan.

3. “We’re happy to allocate your payment to whichever loan you want.”

Navient, for its part, is categorically rejecting the CFPB’s charges.

“The basic servicer standards the Student Loan Bill of Rights creates are essential to protecting student borrowers”, Added Rep. But you shouldn’t consolidate or refinance exclusively to switch servicers because there are potential risks associated with each, says Adam Minsky, a Boston-based lawyer specializing in student loans. “The incentive of the servicer is misaligned from the borrower, that’s where you get these fundamental breakdowns”, says Chopra. For qualification standards and more information, check out the government’s loan cancellation website. It services more than $300 billion in federal and private student loans, which is more than a quarter of all borrowers in the United States.

This is a particularly important distinction for graduates who are considering consolidating and/or refinancing their loans. That’s where cosigners on private loans – mom or dad, or grandma and grandpa – have to jump in. He’s among several regulators put in place by President Barack Obama who are planning to stay on the job, but a recent federal court ruling left an opening for the incoming president to try to dismiss him.