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Union members sue Navient for misdirecting public employees seeking student loan forgiveness

By SHERRY HALBROOK

Sometimes when you are getting a raw deal, it really helps to have a union that can help you work with your fellow members to demand justice.

Members of the American Federation of Teachers, which is one of PEF’s two parent unions, filed a class-action lawsuit in the U.S. District Court for the Southern District in October 2018 to cry foul on behalf of themselves including a PEF member, and others who believe they were misled by a federal contractor when they tried to apply for relief from their student loan debt through the federal Public Service Loan Forgiveness Program (PSLF).

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The PSLF was created to be an incentive for students to pursue careers in public service by rewarding them with loan forgiveness.

At AFT’s request, PEF surveyed its members to identify those who might have been negatively affected by advice or directions they received from the contractor, Navient. PEF member Elizabeth Taylor, a program research specialist 3 at the state Education Department in Albany is among the 11 named plaintiffs in the lawsuit. Many more PEF members could benefit from the suit if it is successful.

Mark Richard, who is PEF’s chief negotiator in the current PS&T Contract negotiations, also is the attorney representing the plaintiffs in this lawsuit.

The lawsuit, which was amended by the AFT members January 16 of this year, is against Navient Corporation and Navient Sollutions, LLC. Navient is a private, for-profit contractor hired by the U.S. Department of Education to service federal student loans that currently total $205.9 billion owed by approximately 6.1 million accounts. Navient is responsible for administering the loans and communicating with borrowers on behalf of the ED about their loans.

Navient is responsible for providing borrowers with the best repayment options for each borrower’s specific financial circumstances and Navient is required to give borrowers accurate information about the repayment and forgiveness options available under federal law, including the PSLF.

According to the lawsuit, Navient has been deliberately failing to provide borrowers with accurate information about how to qualify for the PSLF and has deliberately misdirected borrowers to making years of payments on the wrong kinds of loans to qualify for the PSLF. Navient also directed borrowers to loan repayment plans that did not qualify for the PSLF. Those failures to provide accurate information benefit Navient by keeping more borrowers’ accounts open and keeping them active longer, thereby increasing Navient’s income. The plaintiffs also allege that Navient gave its employees pay incentives to keep their conversations brief with borrowers who called for help.

The lawsuit alleges that Navient’s failures have damaged the borrowers by delaying for years their chances to qualify for PSLF and by failing to inform them of opportunities to consolidate their loans that do not qualify into qualifying loans designed to scale payments based on the borrower’s ability to pay.

The lawsuit aims to stop that unlawful and damaging behavior and force Navient to compensate the borrowers for the damages it has caused them.

In their court filing, the AFT members state:

“Since 1983, the cost of higher education has risen more than 700 percent – five times greater than inflation, and even faster than health care costs. In the face of the massive cost of education, over 40 million people in the United States – more than 10 percent of the population – have taken out student loans totaling over $1.4 trillion. …. Ninety percent of the outstanding student loan volume is comprised of loans backed or funded by the federal government.”

The plaintiffs add that these “skyrocketing” costs have hit public servants especially hard. They are forced to take out substantial student loans to meet their job requirements and maintain or enhance their professional certifications, but they are not highly compensated and struggle to pay back their student debt. The PSLF was created to forgive the public service worker’s federal student debt entirely after he or she makes 120 qualifying payments.

The AFT members state, “The PSLF program is life-or-death critical to America’s public servants who otherwise would never be able to overcome their student debt burden.” Unlike other debt, student loan debt generally cannot be discharged in bankruptcy, except in certain dire circumstances such as a severe disability. “Consequently, for many public servants, PSLF is their only means of escaping their student debt.”

The plaintiffs assert that while the requirements of PSLF are simple and straightforward, “tragically, it does not work that way in practice, in large part because the proper administration of the PSLF program depends on private, for-profit ‘servicing companies,’ with which the (U.S.) Department of Education has contracted to administer and manage federal student loan repayments. The PSLF program depends on the performance of these private servicing companies and their truthful communication with our nation’s most deserving borrowers when they are at their most vulnerable.”

According to AFT members’ filing:

“Navient has not been living up to its obligation to help vulnerable borrowers get on the best possible repayment plan and qualify for PSLF. Instead, Navient has harmed and continues to harm millions of hard-working public servants by routinely providing false information to these borrowers, preventing them from qualifying for the PSLF program.

“Solely in the pursuit of increasing its own profits, and at the direct expense of our nation’s public servants, Navient has:

  • Deceived borrowers by informing them PSLF was not available to them or that Navient does not offer PSLF, without specifying that the Department of Education offers PSLF and an-other servicer, FedLoan Servicing, administers it;
  • Misrepresented to borrowers they were “on track” for PSLF when in fact their loans would not qualify for PSLF without consolidation;
  • Misled borrowers by stating they were “on track” for PSLF when in fact their repayment plan did not qualify for PSLF; and
  • Advised borrowers not to submit paperwork that would verify their employment and other qualifying factors for PSLF, which would have resulted in their loans being transferred to FedLoan Servicing.

“As a direct result of Navient’s fraudulent misconduct, borrowers have been denied loan forgiveness at alarming rates, with horrifying effects on the borrowers and their families and communities.

“Recent data last updated by the Department of Education on September 30, 2018, and released to the public in December 2018 revealed that a shocking 89.19 percent of borrowers who submitted PSLF applications since October 2017 have been rejected. Only 206 borrowers had received loan forgiveness under the program. This number is negligible compared to the estimated 32 million borrowers who were repaying loans that are potentially eligible for PSLF at the end of 2016, according to the Consumer Financial Protection Bureau (“CFPB”).

“Of the 44,724 applications for PSLF that the (U.S.) Department of Education has received and processed, a staggering 72.46 percent of these public servants were denied for purportedly failing to meet program requirements, including the borrower’s loan type, payment plan, or employment.”

The lawsuit alleges that Navient deliberately misdirected borrowers because if they were successful in getting on track for the PSLF Navient would lose the accounts and, therefore, the fees it is paid for servicing those accounts.

By tricking borrowers into thinking they are making the 10 years of required loan payments to qualify for the PSLF, when, in fact, those payments are being made on loans that do not meet the requirement, and/or through repayment plans that do not qualify, Navient holds onto the borrowers’ accounts and prolongs the time it receives fees for servicing them. Navient is supposed to inform borrowers that non-qualifying loans must be consolidated into qualifying loans, and borrowers must switch to qualifying repayment plans, but the AFT members say Navient has failed to inform them of those requirements or directed them to the wrong loans and/or wrong repayment plans.

The plaintiffs allege, “Navient’s misconduct has thus forced thousands of hard-working public servants into a lifetime of debt servitude.”

The plaintiffs ask the court to enjoin Navient from continuing to provide incentives to its employees to steer borrowers into the wrong loans and repayment plans to qualify for the PSLF, to declare the alleged conduct unlawful, and to enjoin Navient from misinforming borrowers about their eligibility for the PSLF.

The union members also ask the court to award compensatory and punitive damages with interest to the affected borrowers.

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