Members of a national teachers union on Wednesday sued Navient, a Wilmington student loan servicer, for allegedly misleading borrowers in public service professions in ways that prevented them from accessing a federal loan forgiveness program.
Instead, publicly traded Navient put profits ahead of borrowers, according to the complaint filed in the Southern District in New York. The lawsuit lists nine teachers as plaintiffs and seeks class-action status, the American Federation of Teachers union and its law firm, Selendy & Gay, said during a news conference.
Navient said it had no comment.
Rather than promoting the availability of the federal Public Service Loan Forgiveness program, which eliminates remaining debt for teachers, nurses, first responders, social workers, and others after 10 years if conditions are met, Navient recommended forbearance and other less-effective remedies to those seeking debt relief, Randi Weingarten, president of the American Federation of Teachers, said in a statement.
Forbearance offers temporary reductions in monthly payments or short-term breaks from payments.
"Navient ignored borrowers' best interests — in violation of its government contract — to prevent borrowers from moving to FedLoan," a Navient competitor that administers the loan-forgiveness program, "so it could continue to earn millions in fees," Weingarten said.
As a result, she said, "people who have dedicated their lives to helping others are paying millions more than they otherwise should in student-loan payments," she said.
The nine teachers listed as plaintiffs are members of the teachers union, which is paying for the litigation. They live in four states, Florida, Maryland, California, and New York.
Recent data released by the Department of Education showed that 98 percent of borrowers who submitted applications for public-service loan forgiveness since October 2017 have been rejected.
Of 32 million Americans eligible to apply for public-service loan forgiveness, 28,000 applied since the statute was passed by Congress in 2007. Fewer than 100 people have received loan forgiveness under the program, Seth Frotman, formerly the Consumer Financial Protection Bureau's top student-loan officer, said during Wednesday's conference call.
Megan Nocerino, a teacher in Broward County, Fla., said she called Navient during family medical leave to care for her son and asked to be enrolled in public-service loan forgiveness.
"I was on the phone with them for less than 10 minutes. I asked for help refinancing [by] doing income-based repayment, but instead I was steered toward deferment or forbearance," Nocerino said during the news conference.
The suit also alleged Navient steered her and others who were eligible for loan forgiveness into nonqualifying plans, and then wrongly told borrowers they were on track for debt forgiveness.
Another plaintiff, Michelle Means, a first-grade public school teacher in Maryland, alleged she was misled by Navient when the student-loan servicer told her "a single missed or late payment would be enough to completely disqualify her for loan forgiveness."
The lawsuit said that's not true: "A borrower's qualifying payments need not be consecutive, and borrowers may continue making qualifying payments even if they have missed payments in the past."
Means did not pursue debt forgiveness further, believing she would be unable to make 120 consecutive payments, and instead went into forbearance. As a result, the suit alleged, Means paid thousands of dollars in principal and interest that would have otherwise been forgiven.
"The student-loan industry has not been held accountable to its failures," said Frotman, who resigned from Consumer Financial Protection Bureau this year in protest against the Department of Education student-loan policies promoted by U.S. Education Secretary Betsy DeVos.
"We all know that Betsy DeVos and D.C. special interests will do everything they can to fight this case so they may continue to operate in the shadows. But, student loan borrowers deserve better. Dedicated public servants deserve better," he said.
The CFPB published a 2017 report documenting borrowers' complaints about student loan servicers, including Navient, PHEAA, NelNet, and others.