Fact Checked

Teachers sue Navient, claim misleading loan forgiveness info

A teacher grades assignment in an empty classroom.Image: A teacher grades assignment in an empty classroom.
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Backed by the second-largest teachers union in the nation, nine borrowers have filed a class-action lawsuit against student loan servicer Navient for allegedly steering them away from a U.S. loan forgiveness program.

Navient, which collects payments on behalf of the U.S. Department of Education, made it seem more difficult to qualify for the Public Service Loan Forgiveness Program than it actually was, teachers claim in their lawsuit against the company. As a result, the teachers say, they ended up paying more than necessary on their student loans.

The lawsuit seeks “millions in damages and class-wide injunctive relief,” according to an American Federation of Teachers’ press release.

What’s the background?

In 2007, President George W. Bush signed a bill that created the Public Service Loan Forgiveness Program.

The program paved the way for certain public service employees to have their student loans wiped out after making 10 years’ worth of payments. But a recent report by the U.S. Government Accountability Office found that less than 1% of those who applied actually had their loans forgiven, which could be caused by confusing eligibility requirements.

In the lawsuit against Navient, the nine teachers claim the company misled them about the student loan forgiveness program. They say Navient provided them with inaccurate information intended to discourage them from applying, because the company didn’t want to lose their accounts.

Navient is paid by the Department of Education based on how many accounts it handles.

Why does it matter?

This lawsuit illustrates the problems many graduates have in qualifying for loan forgiveness at a time when total student loan debt in the U.S. has skyrocketed to more than $1.5 trillion.

The difficulties these teachers face is symptomatic of larger problems in the student loan industry.

More details from the GAO report reveal that of the 19,321 borrowers who applied for forgiveness, only 55 were granted forgiveness.

The teachers’ lawsuit came less than a week after the release of this report.

How could it affect you?

If you work in the public sector and are worried you might be overpaying the government for your student loan, we recommend that you take a close look at the loan forgiveness program’s eligibility requirements.

To qualify for the Public Service Loan Forgiveness Program, borrowers must …

  • Work full time for the government or select nonprofit organizations
  • Borrow the money through a particular type of federal loan known as a Direct loan
  • Opt in to a qualifying repayment plan
  • Make 120 monthly payments, which do not have to be consecutive

What can you do?

If you think you qualify, reach out to the Education Department for more information.

It’s important to keep in mind this program only applies to certain types of federal student loans. So if you’re heading off to college, we recommend you max out your federal Direct loans before you apply for any private loans, because the latter won’t qualify for loan forgiveness under the Public Service Loan Forgiveness Program.

Graduates should think twice before refinancing or consolidating their federal student loans with a private lender, because such a move would disqualify them from loan forgiveness.

Do your best to make each of your student loan payments on time. While missing a payment won’t necessarily disqualify you from the program, it will put you that much further from making the 120 payments necessary as one of the loan forgiveness prerequisites. Not to mention, missing payments could hurt your credit health.

About the author: Tim Devaney is a personal finance writer and credit card expert at Credit Karma. He’s a longtime journalist who prides himself on being a good storyteller who can explain complex information in an easily digestible wa… Read more.