Who is Navient (aka Sallie Mae)
In 2014 Sallie Mae announced they would be splitting into two separate entities, one to manage their private student loan portfolio (Sallie Mae), and a new company Navient would service all their federally backed student loans, as well as perform “asset recovery” for those loans. We will talk about “asset recovery” and what it is a bit later, it’s important. They currently have the largest federal student loan portfolio of all the federal servicers in the $1.3 trillion dollar student loan debt debacle.
A Brief History Leading Up To Todays Student Loan Crisis
The student loan crisis we have today didn’t start recently, there has been a number of laws passed over the years which slowly ripped away student loan borrower rights and helped form the dark student loan cloud we have over our nation.
- 1978 Bankruptcy Reform Act is passed and prevents students from filing bankruptcy within the first 5 years of graduation. This helped turn student loans into a protected financial product where the lenders could provide money for student loans at a very mitigated risk level.
- 1990 The period in which borrowers couldn’t discharge their student loans through bankruptcy was extended from 5 years to 7.
- 1998 President Clinton signs into law the Higher Education Amendments of 1998 removing all provisions allowing for a student loan discharge through bankruptcy.
These laws were enacted to incentivize student loan lending, so everyone who wanted to go to college could do so by borrowing money. The reason for the legal changes was that student loans offered no collateral, so lenders needed to mitigate risk to continue lending or there might not be a market for student loans at all. This may have worked, but created an enormous student loan bubble. Lenders could now provide loans at very low risk. As the appetite for student loan lending grew, college tuition skyrocketed. Colleges and Universities knew that kids could borrow very easily, so why not hike up tuition rates that far surpass inflation?
Navients Involvement and Its “Asset Recovery” Business.
When a student loan goes into default, collection agencies are allowed to charge “reasonable fees” for collecting the debt. The fees range from 16%-25% depending on what type of federal loan it is. Navient, in all its wisdom, decided that it would be smart to own a few debt collection agencies to services its own defaulted student loans. Currently, they own Pioneer Credit Recovery & General Revenue Corporation. By owning both the debt and the collections agencies, Navient is guaranteed payment on the federal student loan. In fact, they benefit if the student loan goes into default, because not only is the loan government backed & guaranteed, but now they can add additional fees onto the loan when it goes to collections.
In 2016 Navient reported a net income of $681 million dollars. Currently, default rates on federal student loans are 11.5% which is up there with the highest it’s ever been. How is it that we have a system where student loan borrowers are unable to make payments, yet the private organizations contracted by our government are raking in the rewards on the backs of the suffering borrowers?
Lawsuits & Other Actions Against Navient
On October 5, 2017, the state attorney general of Pennsylvania files a lawsuit against Navient for deceptive, predatory and harmful practices. The state is claiming that Navient has repeatedly engaged in actions that harmed the borrowers by:
- Making predatory loans for For-Profit colleges where graduation rates were less than 50%, and with a very clear expectation that student would not, in fact, be able to repay the loans
- Increasing its sub-prime lending knowing that these loans were at a very high risk of default
- Steering borrowers the wrong way with their repayment options. Instead of assisting them with income-driven repayment plans which can offer a zero payment, they often put them wrongly into a forbearance which accumulated interest and didn’t shorten the term of their loan as an IDR play would. Its alleged that Navient added $4 BILLION in interest onto the principal balance of borrowers this way.
On January 18th, 2017 the Consumer Financial Protection Bureau(CFPB) filed a lawsuit against Navient for systematically failing borrowers at every stage of repayment. Including in the lawsuit was Pioneer Credit Recovery. The CFPB alleged that:
- Navient failed and repeatedly misapplied payments, often with the same accounts over numerous months and would continue until the consumer discovered the error and reported it to the company.
- Navient failed to educate and inform borrowers of their repayment options. Instead of steering them to the federal Income-Driven Repayment plans designed precisely to help struggling borrowers, they often suggested Forbearance which does not help the borrower and added over $4billion on the balances of their loans
- Navient obscured and failed to alert borrowers of renewal notices that borrowers must complete in order to maintain their income-driven repayment plan
- Navient failed to inform disabled and vets that that may qualify for a permanent disability discharge of their federal student loans, and thus harmed those who needed help the most and were unable to physical work to pay off their student loans.
On January 18th, 2017 state attorney general of Illinois Lisa Madigan, as well as the state attorney general of Washington State Bob Ferguson, filed lawsuits against Navient as well as its subsidiaries Pioneer Credit Recover & General Revenue Corporation for widespread abuses across all of its businesses. The suits allege that Navient put its profits before the interest of the people. The allegations the state of IL & WA put forth are very similar to the one CFPB found.
- Misplaced payments
- Failing to help borrowers with their best options for repayment plans
- Failing to inform borrowers of the annual re-certification required on IDR plans
- Misleading practices
- Deceptive collection practices
- Subprime lending when it was known the default rates on these loans were extraordinarily high.
Navient released this response to the lawsuits, and on March 24th in a motion to dismiss the lawsuits Navient stated that “There is no expectation that the servicer will act in the interest of the consumer”.
Changing Your Student Loan Servicer
Thankfully, you have options to change your loan servicer. The easiest way, which also makes your loans eligible for PSLF is to apply for the Direct Loan Consolidation program. It’s a federal program that will take all your student loans, and bundle them into one new loan with a weighted average interest rate. When applying for the consolidation you are able to select which servicer you would like your loans to be sent to between Nelnet, Fedloans, Navient or Great Lakes. You can apply on your own for a Direct Loan consolidation for free, or you can give us a call and we will connect you with a private organization who can offer assistance for a fee.
Another option is to apply for a private student loan consolidation. This would remove any federal student loan benefits you have and eligibility for income-driven repayment plans and forgiveness programs. If you are unable to take advantage of any of the forgiveness programs offered by federal student loans, then considering a private consolidation could be a smart move. Through a private consolidation, you may benefit from:
- Reduced interest rate
- More favorable repayment terms
- Better customer service
- In any event, it’s important to consider that there is no one size fits all solution. Each person needs to evaluate their own situation and decide accordingly after researching all their options.
Navient Ratings & Reviews
P.O. Box 9500
Wilkes-Barre, PA 18773
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.