Student loan giant Navient and borrowers settle lawsuit over troubled forgiveness program

Student loan giant Navient (NAVI) promised to revise a government loan program after a classroom lawsuit filed by student borrowers in 2018 was resolved.
The preliminary agreement - pending final court approval - requires Navient "to improve its internal resources, maintain regular training and monitoring for call center agents, update forms sent to borrowers, and update its website" .
Read More: How To Repay Student Loans: The Complete Breakdown
Part of the comparison is that Navient is donating $ 1.75 million to a nonprofit that provides education and student loan advice and advice to government employees. The 10 plaintiffs, all of whom are borrowers, will each receive $ 15,000.
"This extraordinary agreement is a big step forward that will help millions of borrowers get the relief they need - and which the federal government has promised - by improving the resources available to them through their credit service provider," said Randi Weingarten, president of the American Federation of Teachers, who supported the plaintiffs, said in a press release.
California State Fullerton Department of Human Communication Studies. Director Jon Bruschke with a handshake on social distance with graduate Kaitlin Buxton in Long Beach, California, on Saturday, May 23, 2020. (Photo by Keith Birmingham / MediaNews Group / Pasadena Star-News via Getty Images)
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"It was the most confusing thing I've ever seen"
Congress created the Public Service Loan Forgiveness Program (PSLF) in 2007 to help various types of public employees clear their student debt after 10 years of loan payments.
Management of the program is generally seen as a failure: more than 98% of applications from teachers, firefighters, police officers and other officials are rejected. There have been several legal disputes in the past ten years.
The problems raised by the plaintiffs in the case resolved on Friday included: They were not informed of the forgiveness program, which requires 120 punctual payments; do not lead borrowers to the “best possible payment schedule” to qualify for forgiveness; and harm civil servants by "routinely providing wrong information to borrowers".
Navient's actions, the alleged complaint alleged, resulted in them being denied lending. Judge Denise Cote rejected most of the plaintiffs' claims in July 2019 and found that many of the claims were too vague or lacked any documentation. The settlement ends the lawsuit.
(Graphic: David Foster)
Aside from this lawsuit, which has now been settled, other borrowers are directing their PSLF frustrations to Education Minister Betsy DeVos.
By April of this year (latest available data), approximately 150,000 borrowers had applied for PSLF, the original program. Around 1.7% of the applications were approved. The average relief amount was $ 66,000.
Ministry of Education officials claim Congress has made the rules too restrictive.
Many applications were rejected for technical reasons: the borrower had not made enough qualified monthly payments - all 120 - or information was missing from his records. Or their loans weren't eligible at all.
"It was the most confusing thing I've ever seen in my life, and I'm just being honest," said Ami Sandler, a California-based teacher, in an earlier interview with Yahoo Finance. "It was the most boring and complicated thing I've ever seen."
In June, California Attorney General Xavier Becerra filed a lawsuit against the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program, which was created as a temporary solution to the PSLF program but also had a high rejection rate. Becerra thought the temporary program was “practically inaccessible” due to its “complicated application process”.
Navient Corporation Indianapolis location. (Getty)
Contract conditions
In particular, Navient agreed:
Improve internal resources for call center representatives, including upgrading help and call flow procedures, implementing new procedures that require customer service representatives to look for keywords or phrases that indicate PSLF eligibility, and answering leading questions about employment by qualified employers.
Update forms sent to borrowers if they approve loan forgiveness so that the forms contain a reminder that lending options may be available and direct borrowers to the Federal Student Aid and FedLoan website Servicing to learn more about PSLF.
Design new electronic forms that can be emailed to borrowers who are interested in PSLF.
Update the website and chat communication with borrowers by maintaining direct links on the Navient website to access the National Student Loan Data System (which contains key federal government information about the PSLF program) and ensuring that web chat conversations are held contains important questions for borrowers that may be eligible for PSLF.
Maintain training and monitoring of call center representatives through training on new practice improvements and regular monitoring of sample calls to ensure compliance with new policies and procedures.
"The agreement is a good example of how borrowers and service providers can work together for the benefit of both parties," said Weingarten of AFT. "It is recognized that PSLF is an important program for many graduates who forego higher corporate salaries to serve the public instead."
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Aarthi Swaminathan is a Yahoo Finance reporter dealing with consumer finance and education. Aarthi can be reached at aarthi@yahoofinance.com. Follow her on Twitter at @aarthiswami.
Continue reading:
"Designed to fail": Two officials describe the government's problematic student loan program
"I was misled": The teacher at a public school tells Congress about the nightmare of student debt
US teachers are finding it increasingly difficult to find affordable housing: study
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