One of the companies that handles federal student loans has been steering some borrowers toward repayment plans that cost them more money over time.
That’s the finding of a report that the Department of Education’s Office of Federal Student Aid did on Navient, one of its loan servicers. But while FSA offered suggestions for improving some of Navient’s practices, it says the company didn’t necessarily do anything wrong.
The report is dated May 2017. A team from Federal Student Aid listened to 2,388 calls shorter than 5 minutes between student loan borrowers and Navient, a publicly traded company. It found that in nearly 10 percent of calls, Navient’s customer service representatives offered borrowers only the option of “forbearance,” which allows them to put off making any payments for a certain period of time.
But during forbearance, interest keeps growing — adding significant expense for the borrower. As The Associated Press reports: “A 2017 study by the Government Accountability Office estimates that a typical borrower of a $30,000 student loan who places their loan into forbearance for three years — the maximum allowed for economic-hardship forbearance — would pay an additional $6,742 in interest on that loan.”
Some borrowers were offered forbearance even when they said they could make a payment within a time frame that wouldn’t incur an additional cost. In other cases, the customer service reps didn’t mention the option of switching to an available income-driven replacement plan.
The Consumer Financial Protection Bureau sued Navient last year, partly for these reasons. Five states — Illinois, Pennsylvania, Washington, California and Mississippi – also are suing Navient. Three of those states had heard there was an audit but none of them had seen it, according to the AP.
“Navient told the public that there was no merit to the CFPB’s lawsuit even after it received an Education Department audit that bolstered the allegations and found the company was not adequately servicing student borrowers,” Warren said in a statement. “Navient needs to explain the appalling findings of this audit and why the company denied that it existed.”