Van Hollen, Warren, Blumenthal Call On Department of Education to Deliver Additional Relief to Student Loan Borrowers Cheated by Navient

U.S. Senators Chris Van Hollen (D-Md.), Elizabeth Warren (D-Mass.), and Richard Blumenthal (D-Conn.) sent a letter to Secretary of Education Miguel Cardona urging him to provide additional relief for student loan borrowers affected by Navient’s decades-long record of deceptive and abusive practices. While the historic $1.85 billion multi-state settlement against Navient provides critical and long overdue relief for borrowers cheated by the company, many borrowers are still ineligible for student loan relief under the settlement terms, and others may not receive appropriate compensation for the harms they suffered under Navient. The senators called on the U.S. Department of Education (ED) to take additional action to redress all of Navient’s victims, including by building a path toward loan forgiveness for the millions cheated by Navient through creating an income-driven repayment waiver similar to the one the department recently made available to correct the broken Public Service Loan Forgiveness program.

"Given that this settlement will not fully compensate or remedy the harms inflicted by Navient on student borrowers, and in light of ED’s repeated failures to address Navient’s predatory practices, ED has the responsibility to use its tools to make things right for Navient’s victims,” wrote the senators.

Instead of guiding borrowers with appropriate services and protections, Navient engaged in predatory practices including deceptive servicing practices, steering borrowers into costly long-term forbearances, and making subprime loans to borrowers they knew would not be able to repay. Last month, Navient and 39 bipartisan state attorney generals reached a historic $1.85 billion settlement that requires the company to cancel $1.7 billion in delinquent private student loan debts and pay $95 million in restitution.  

However, only about 66,000 of all student loan borrowers serviced by Navient would be eligible for loan forgiveness under the terms of the settlement, leaving millions of borrowers ineligible for any forgiveness. Only about 350,000 borrowers are each eligible for a $260 restitution payment – far from the thousands in additional debt that many borrowers incurred due to Navient’s predatory practices.  

The senators asked ED to answer how it plans to take action to provide relief to the millions of borrowers cheated by Navient for the full scope of the financial injury they experienced.

Senator Van Hollen is one of the nation’s leading voices for student loan borrowers, holding companies accountable for predatory practices that harm and trap borrowers in years of debt and leading the call for affordable higher education. 

• Senator Van Hollen, along with Senators Warren, Blumenthal, and Tina Smith (D-Minn.), sent letters to four federal loan servicers, requesting information on their plans to support borrowers when student loan payments resume. 
• Senator Van Hollen, along with Senators Warren, Blumenthal, Smith, and Sherrod Brown (D-Ohio), sent a letter to Maximus, the company that is assuming Navient’s federal student loans servicing contract, questioning its troubling history and seeking assurances that borrowers will receive appropriate services and protections during the transition. 
• Senator Van Hollen, along with Senators Warren, Blumenthal, Smith, Brown, Cory A. Booker (D-N.J.), Bernard Sanders (I-Vt.), Tammy Baldwin (D-Wis.), and Edward J. Markey (D-Mass.), sent a letter to the Department of Education urging Education Secretary Miguel Cardona to use his authority to automatically remove all student loan borrowers in default.
• Senator Van Hollen, along with Senators Warren, Blumenthal, Brown, Smith, Markey, and Robert Menendez (D-N.J.) sent letters to the heads of Pennsylvania Higher Education Assistance Agency, Granite State, and Navient calling on them to correct past errors with borrowers’ accounts and address growing concerns over their preparedness to transfer millions of borrowers to new servicers. 
• In April 2021, Senator Van Hollen joined Senators Warren and Raphael Warnock (D-Ga.) and a group of colleagues in a letter to Secretary Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.
• Senator Van Hollen co-sponsored S.Res. 46, introduced by Senator Chuck Schumer (D-N.Y.), requesting that the administration cancel up to $50,000 in federal student loan debt through executive authority and encouraging the administration, in taking such action, to ensure administrative debt cancellation helps close racial wealth gaps and avoids the bulk of Federal student loan debt cancellation benefits accruing to the wealthiest borrowers.
• Senator Van Hollen joined a letter, led by Senator Mazie Hirono (D-Hawaii), to the Biden administration in support of the doubling the Pell Grant.
• Senator Van Hollen joined a letter, led by Senator Tim Kaine (D-Va.), urging Secretary Cardona to use administrative flexibilities to fix the Public Service Loan Forgiveness program.
• Senator Van Hollen joined a letter, led by Senator Warnock, requesting ED to continue suspending interest on federal student loans for the duration of the COVID-19 national emergency.
• Senator Van Hollen joined a letter by Senator Booker urging ED to continue to suspend wage garnishment and other forced collections of student loan borrowers in default for the duration of the COVID-19 public health emergency.
• Senator Van Hollen co-led a bicameral letter with Rep. John Garamendi (D-Calif.) and Senator Ben Cardin (D-Md.) to ED to allow Returned Peace Corps Volunteers to credit their full service overseas toward PSLF or Temporary Expanded Public Service Loan Forgiveness. Specifically, this letter requests that ED count months of service toward PSLF even for Volunteers whose federal student loans were in deferment or forbearance status during their service.  

The full letter is available here and below.

Dear Secretary Cardona: 

We are writing to urge you to ensure complete relief to federal student loan borrowers following the historic $1.85 billion multi-state settlement against Navient for its decades-long record of cheating and misleading borrowers. For years, Navient engaged in widespread unfair and deceptive student loan servicing practices and abuses in originating predatory student loans while the Department of Education (ED) turned a blind eye. ED has a responsibility to all borrowers harmed by Navient’s abusive practices and we urge you to move quickly to supplement the settlement against Navient with additional relief for borrowers.

While other student loan servicers have engaged in forbearance steering and other predatory practices, Navient has a particularly disturbing history of abuse and misbehavior. The settlement, which was secured by a bipartisan group of 39 state attorneys general, follows dozens of lawsuits alleging that Navient “deceptively steered distressed federal loan borrowers into costly long-term forbearances instead of informing them about the benefits of income-driven repayment plans,” “made predatory subprime loans to students attending for-profit schools and colleges…even though it knew that borrowers would be unable to repay the loans,” and “engaged in a variety of other unfair and deceptive servicing practices,” including misallocating payments and “asking delinquent borrowers to pay more than the amount necessary to bring their accounts current.” Apart from being sued by the states, Navient has been cited by the Department of Justice, the Consumer Financial Protection Bureau, and other federal agencies for failing to report and address borrower complaints while overcharging borrowers, servicemembers, and the federal government.

The settlement requires Navient to cancel $1.7 billion in delinquent private student loan debts and pay $95 million in restitution. While this agreement provides critical and long overdue relief to borrowers across the country, millions of Navient’s borrowers will not be eligible under the settlement terms, and those who are may not receive relief that provides appropriate compensation for the harms they suffered under Navient. Debt cancellation will primarily cover borrowers who hold subprime private student loans and meet additional eligibility requirements, including that the loans were disbursed between 2002 and 2014; have been delinquent for at least seven months; are within a statute of limitations period or still subject to credit reporting as of June 23, 2021; were used at certain for-profit institutions; that borrowers live in one of the 39 states that participated in the settlement; and have a mailing address on file with Navient as of June 30, 2021. In total, about 66,000 borrowers – 0.55% of all student loan borrowers whose loans were serviced by Navient – will be eligible for loan forgiveness under the terms of the settlement. 

To qualify for restitution, borrowers must have at least one loan eligible for income- driven repayment, must have been placed in a certain type of long-term forbearance, must have resided in a restitution-participating state as of January 2017, and meet several other eligibility requirements. For the roughly 350,000 federal borrowers who are eligible for restitution, the average restitution payment will be $260 – a pittance compared to the significant additional debt that many incurred as a result of Navient steering them into unnecessary months and years of forbearance. According to a GAO report, “a typical borrower with $30,000 in loans who spends the first three years of repayment in forbearance would pay an additional $6,742 in interest,” 17 percent more than they otherwise would. 

Given that this settlement will not fully compensate or remedy the harms inflicted by Navient on student borrowers, and in light of ED’s repeated failures to address Navient’s predatory practices, ED has the responsibility to use its tools to make things right for Navient’s victims, and the ability to do so. For example, ED should consider taking a page from its recent decision to provide a limited Public Service Loan Forgiveness (PSLF) waiver that will allow eligible borrowers’ prior payments to count toward loan forgiveness. This PSLF waiver will provide relief to more than 500,000 public servants across the country. ED can build off this decision and create a path to loan forgiveness for millions of other borrowers cheated by Navient by creating a similar income-driven repayment waiver.

The Navient settlement comes at a critical time. While ED made the right decision to extend the student loan payment pause through May 1, 2022, about half of all federal student borrowers are at risk of falling behind on their loans once monthly payments resume. It is urgent that ED take action to redress Navient’s victims for the full scope of the financial injury they experienced. To ensure the Department does so on a timely basis, we are seeking information on ED’s plans to make these borrowers whole. We ask that you provide answers to the following questions no later than February 22, 2022:

1. How many student loan borrowers do you estimate will not receive any relief from the multi-state settlement against Navient? How many will not receive loan forgiveness? How many will not receive restitution? Please provide state-level estimates of the number and percent of all borrowers who will not receive forgiveness and the number and percent who will not receive restitution. 

2. What actions will ED take to provide relief to student loan borrowers who were harmed by Navient? Please describe your plans in detail. 

1. What actions will ED take to provide relief to borrowers who are not eligible to receive forgiveness or restitution from the Navient settlement?

1. For borrowers who are eligible for loan forgiveness or restitution under the Navient settlement, what actions will ED take to ensure that they are aware of and take advantage of this relief? Will ED take any actions to supplement the relief they receive? 

3. According to the details of the settlement, borrowers who are eligible for restitution will be notified with a postcard in the mail from the settlement administration later this spring to be followed by an automatic payment. What steps will ED take to ensure that all eligible borrowers are notified and receive their payment?

4. The settlement also requires Navient to notify Federal Family Education Loan borrowers about ED’s PSLF limited waiver opportunity, which offers millions of public service workers the chance to have previously non-qualifying repayment periods counted toward loan forgiveness. What steps will ED take to ensure that Navient complies with this requirement?

5. The settlement includes conduct reforms to ensure that Navient improves its servicing and debt collection operations going forward, including by “explaining the benefits of income-driven repayment plans” to its customers and “offering to estimate income- driven payment amounts before placing borrowers into optional forbearances”; “making additional attempts to notify borrowers of the need to annually recertify income and family size information” under their income-driven repayment plans; and “using default payment allocation methods that are favorable to borrowers.” What steps will ED take to ensure that Navient is meeting each of these conduct reforms?

Sincerely,