How This New Navient Memo Affects Your Student Loans


A new, unsealed internal memo from Navient, one of the nation’s largest student loan servicers, may shed light on how Navient is managing your student loans.

Here’s what you need to know.

Navient Memo

The memo, which was written in June 2010, details Navient’s strategy to service federal student loans. Today, Navient services more than $300 billion in student loans for more than 12 million borrowers. The portion of the memo that potentially has raised eyebrows relates to forbearance, which allows you to pause payments on your federal student loans.

“Our battle cry remains ‘forbear them, forbear them, make them relinquish the ball,’ the memo states. “Said another way, we are very liberal with the use of forbearance once it is determined that a borrower cannot pay cash or utilize other entitlement programs. Generally speaking, out of every 10 resolved [U.S. Department of Education] borrowers, 7 will forbear, 1 will pay cash, and 2 will use a deferment or some other entitlement. That mix is likely to change over time as we improve our ability to communicate the benefits of and fulfill other programs such as income-based repayment.”

The allegation, according to the Consumer Financial Protection Bureau (CFPB), is that Navient recommended that borrowers choose forbearance rather than an income-driven repayment program. Why is that difference important?

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Student Loan Repayment

With forbearance, you pause payments on your federal student loans – typically for a temporary period – until you can afford to make student loan payments again. While your payments are paused, the downside is that interest still accrues on your federal student loans. So, forbearance costs you more money in the form of additional interest.

Rather than pause payments, income-driven repayment plans enable you to make student loan payments based on your income, family size and other factors. With income-driven repayment plans, your payment may be as small as $0 per month. While interest also accrues with income-driven repayment plans, you can receive student loan forgiveness on your federal student loans after 20 years for undergraduate student loans or 25 years for your graduate student loans.

“The evidence unsealed in federal court confirms that Navient’s practices that added billions of dollars of debt to struggling borrowers emanated from the top echelon of the company,” Seth Frotman, executive director of the Student Borrower Protection Center, told The Washington Post. “The time has come for policymakers to admit this company’s practices are predatory and corrupt — it should not be given a single additional taxpayer dollar.”

Navient says it has a positive record of helping student loan borrowers stay out of default. “Using an innovative, data-driven approach, Navient is helping to drive down loan defaults,” said Jack Remondi, president and CEO of Navient. “These data show the borrowers we serve are seeing increased success in repayment and avoiding the negative consequences of default.”

According to Navient, one-third of federal Navient-serviced borrowers, and approximately half of dollars, are enrolled in an income-driven repayment program. Further, Navient says that borrowers whose loans are serviced by Navient defaulted at 6.8% within three years of leaving school compared with an average of 10.1% for all student loan servicers.

Navient Lawsuit

The memo, which was one of several documents unsealed by a federal judge, is part of a lawsuit against Navient, which was filed by the CFPB in January 2017. The CFPB alleges that, among other allegations, Navient “systematically and illegally [failed] borrowers at every stage of repayment,” including:

  • created obstacles to repayment by providing bad information;
  • processed payments incorrectly;
  • failed to act when borrowers complained;
  • illegally cheated many struggling borrowers out of their rights to lower payments, which caused them to overpay for their student loans;
  • deceived private student loan borrowers about requirements to release their co-signer from the loan; and
  • harmed the credit of disabled borrowers, including severely injured veterans

The CFPB also alleges that Navient improperly directed borrowers into forbearance when these borrowers otherwise might have qualified for income-driven repayment plans, and did not adequately keep borrowers in income-driven plans informed of deadlines to maintain their eligibility under such plans. Navient has denied the allegations publicly and in court filings.

What Action Can You Take?

When it comes to your student loans, there are several actions you can take:

1. Understand all your student loan options

There are four primary ways to manage and repay your student loans. Make sure you understand all your options.

  • Student Loan Refinancing
  • Student Loan Consolidation
  • Income-Driven Repayment Plans
  • Student Loan Forgiveness

This student loan quiz takes less than one minute to complete and provides you with a free, customized student loan repayment plan.

2. Maintain careful records

Keep an organized record of all your student loan payments, including any correspondence with your student loan servicer. It is best to communicate in writing with your student loan servicer.

3. File a complaint

If you feel you have been wronged by your student loan lender or your student loan servicer, you can make your voice heard by sending a formal complaint to:

  • U.S. Department of Education
  • Consumer Financial Protection Bureau
  • Your lender
  • Your servicer

4. Pay Off Your Student Loans Faster in 2019

You can also take these simple steps to pay off your student loans faster in 2019.