In one customer’s case cited in the Illinois state lawsuit, Navient “acknowledged
the repeated errors that occurred each month but offered no solutions.”
Many of Navient’s private student loans — those made outside the federal loan program — required
borrowers to obtain a co-signer, who is legally on the hook for making sure the loan is repaid.
To release a co-signer from a loan, Navient requires the borrower to make a minimum number — usually 12 — of “consecutive, on-time payments.” But if someone did not make a payment one month because their bill was $0, Navient treated
that as a failure to make “consecutive” payments — and it then reset the borrower’s consecutive-month payment count to zero.
Many of Navient’s customers — nearly half of those with direct federal loans,
according to Navient — did manage to enroll in income-based repayment plans.
When borrowers sent in lump-sum payments with instructions to pay off a specific loan, Navient sometimes
instead divided the payment among all of the loans in the borrower’s account, the consumer bureau said.
From 2000 to 2009, Navient’s predecessor company, Sallie Mae, from which it split off in 2014, made private,
subprime loans to borrowers it knew were likely to default, the state attorneys general said.
In particular, the company is said to have pushed many customers toward forbearance, which lets
borrowers stop making payments for up to 12 months — though interest continues accruing.
