Fanny Sampson co-signed student loans for three of her four children, so when one of her daughters got a letter in May from student debt servicer Navient saying it would no longer accept credit card payments, the Northbrook resident stepped up with her checking account number.
Not long after, Sampson, her daughter and even her son, whose name isn’t on the loan, started getting calls saying the loan was delinquent. Sampson, who estimates that her children are on the hook for nearly $100,000 in combined student debt, said she wasn’t notified about an increase in the loan’s variable interest rate. As a result, the automatic payments deducted from her checking account no longer covered the entire balance due.
“I said, ‘You call me three times a day to tell me that I’m delinquent, but why didn’t you have a courtesy call telling me that my interest rate was going up?'” Sampson recalled. Other aggravations she’s encountered include inconsistent service from call center representatives and requests to speak to supervisors that go unmet.
Sampson is far from alone in experiencing frustrations dealing with Navient, which services $300 billion in student debt — about a quarter of all federal and private loans nationally.
The company is facing lawsuits in Illinois and elsewhere from federal and state regulators, as well as consumers, over a range of business practices, including allegedly making unauthorized robocalls, doing a poor job of tracking payment processing errors, steering borrowers into costlier repayment options and misapplying payments. The U.S. Consumer Financial Protection Bureau sued Navient earlier this year in federal court in Pennsylvania, accusing the company in a news release of “systematically and illegally failing borrowers at every stage of repayment.”
Meanwhile, Illinois lawmakers sent Gov. Bruce Rauner a bill earlier this summer that would create new rights for customers of Navient and other student debt servicers. Among other measures, the proposed law would require the companies to give borrowers clear information about how they can pay their loans and the amount of payments, including fees assessed, the total amount due for each loan, payment due dates and interest accrued during billing cycles. Rauner has until early next week to sign or veto the bill, which has the backing of Attorney General Lisa Madigan, whose office filed its own lawsuit against Navient earlier this year.
Navient has denied the state and federal allegations against it and is fighting them in court, arguing that the company follows the law and goes above and beyond disclosure requirements.
Consumer complaints about student debt servicers — whose responsibilities include processing payments, explaining repayment options to borrowers, and collecting on delinquent and defaulted loans — aren’t limited to Navient.
A recent report from the CFPB found that borrowers say their servicers often provide them with information on hardship forbearance or deferment — which pause payments but not interest on outstanding debt — instead of “potentially more beneficial” options like income-driven repayment plans. Borrowers also complained about lost documents and inaccurate accounting that muddied their good names. Some reported being contacted by collection companies for accounts that had been paid in full.
The CFPB echoes other consumer advocates, who say the U.S. Department of Education is stalling on critical protections for borrowers.
“For too many years, the Department of Education and private lenders have failed to conduct active oversight of the loan servicers they use to collect payments, leaving borrowers to fend for themselves,” said Suzanne Martindale, a Consumers Union lawyer whose areas of focus include student loans.
While complaints about the student debt servicing industry are widespread, Navient in particular has become a focal point for regulators and consumers.
“Navient is one of the worst offenders in Illinois and around the country, steering borrowers toward forbearances that increase loan costs and applying repayments inaccurately,” said Erin Steva, Midwest director for Young Invincibles, an advocacy group for adults ages 18 to 34.
The CFPB received more complaints about Navient in a recent three-month period than it did about any other company in any industry. From November through January, the CFPB received an average of 1,439 complaints against Navient per month, according to an April report from the agency. The student debt company with the next-highest average was American Education Services, with 149.
Year to date, about 300 complaints from Illinoisans have been filed against Navient at the federal agency, more than double the number that piled up in all of 2016. Virtually all of the complaints lodged by Illinois consumers with the federal bureau received a timely response from Navient, agency records show.
The CFPB isn’t the only federal agency fielding complaints about Navient.
In June, a half-dozen consumer groups asked the Federal Communications Commission to take action against the company, accusing it of harassing borrowers with automated phone calls. And an Illinois man filed a federal lawsuit against the company in May seeking class-action status over robocalls.
Navient, meanwhile, is aggressively defending itself against the allegations brought by consumers and regulators, asking courts to toss out the state and federal lawsuits.
Cook County Circuit Judge Kathleen Pantle held a hearing last month on Navient’s motion to dismiss Madigan’s lawsuit, which the judge is now weighing.
Madigan’s lawsuit, filed in January, alleges some borrowers must contact Navient monthly to “fix the same errors on their accounts,” including how payments are spread across multiple loans or applied to unpaid interest, fees or principal.
“Sometimes the payment was intended to pay off a specific loan, but Navient allocated the payment to all of the loans,” the lawsuit alleges. Decisions on allocating and applying payments could lead to higher interest charges and negative information sent to credit agencies, the suit says.
Assistant Attorney General Michele Casey told Pantle at the July hearing that Navient assured struggling borrowers it would give tailored advice, including whether income-based repayment plans or forbearancewould be most suitable.
In reality, Casey alleged, Navient workers were compensated partly by keeping phone calls to under six minutes and therefore steered most borrowers into “one-size-fits-all” forbearance because it got them “off the phone fast.” Casey said that saves Navient money even as its training materials say forbearance should be a “last resort.”
“That was an unfair and deceptive practice under the Consumer Fraud Act,” she said.
Navient’s lawyer, however, told the judge the federal Higher Education and Truth in Lending acts already impose disclosure requirements. The Illinois attorney general wants to retroactively impose new disclosure requirements, Navient said.
“What they’re doing is adding disclosure requirements that exceed the ones that Congress set,” Michael Shumsky, a lawyer representing Navient, told the judge.
“There’s no allegation that when somebody called Navient and said, ‘I’m struggling to make my payments. Is there something that you can do for me?’ that Navient said, ‘Go away. We’re not interested in helping you,'” Shumsky said.
As for allegations that payments were misapplied, Navient said an internal analysis of customer complaints shows, in most cases, borrowers didn’t specify how to allocate their payments. The company said it’s a common consumer credit practice to apply payments to outstanding interest before principal.
While Navient’s request to toss out the Illinois lawsuit is under review, a federal judge in Pennsylvania earlier this month rejected the company’s motion to dismiss the CFPB’s lawsuit.
Navient takes issue with many of the complaints that have been filed against the company with regulators.
For example, Navient spokeswoman Patricia Nash Christel said the company’s analysis shows most of the complaints lodged against it through the CFPB’s portal are related to loan policies — including disagreements about loan terms set at the time they were made — not servicing errors.
The more than 1,400 complaints per month Navient saw from November to January represent a tiny fraction of the 12 million customers whose loans it services. The company says it has 750 million interactions a year with borrowers, including through letters and phone calls, and processes more than 90 million payments annually.
In response to complaints about robocalls, Navient told the FCC in June that student loan servicers “are different from telemarketers offering a free cruise.”
“Calls and text messages from student loan servicers are proven methods that help millions of Americans,” Navient said in a 64-page letter to the FCC. “Live contact with borrowers is key to helping them navigate the multitude of options and the complexity of the repayment system.”
Nine times out of 10, federal student loan borrowers who default haven’t responded to Navient’s outreach or contact in the preceding year of missed payments, Christel said.
Navient has said it tried “telephone contact” in 2015 with 1.2 million borrowers who weren’t enrolled in income-driven repayment plans, but they “never responded to our outreach.” The company said some borrowers choose forbearance even when offered enrollment in alternative repayment plans.
The company’s arguments on its behalf are of little comfort to Sampson, the Northbrook mother who co-signed her kids’ loans.
Navient said it couldn’t discuss Sampson’s situation unless she signed a waiver granting permission, which she declined to do.
Her children have bachelor’s degrees from DePaul University, the University of Maryland, the University of Wisconsin and Loyola University. One has a political science degree, another a liberal arts degree, and two have bachelor’s degrees in business. Her 23-year-old son has a steady job, but he lives at home, and much of his pay is going to repay his student loans. She said he was briefly in a forbearance program.
“He said, ‘Mom, I got a breather,'” Sampson recalled. “I said, ‘You have to be careful because it’s not that they’re pardoning what you owe.'”