Teachers are keeping a close watch on a lawsuit filed by nine educators against Navient, one of the country’s largest federal student loan servicers. The lawsuit, backed by the American Federation of Teachers, alleges that the company misled borrowers and impeded them from participating in a federal loan-forgiveness program designed for public service workers.
This program, Public Service Loan Forgiveness, is designed to ease the student loan burden for government and nonprofit employees, including teachers. After borrowers make 120 payments on their federal student loans, over the course of 10 or more years, the remaining balance on their loans can be forgiven.
Qualification rules for the forgiveness program are complex, and require that borrowers have a certain type of federal loan and repayment plan. The teachers’ lawsuit, filed earlier this month in the U.S. District Court for the Southern District of New York, came after the U.S. Department of Education released data in September on the first round of applicants to the program. Of 28,000 borrowers who applied between 2017 and June of this year, only 96 were approved.
Not all of the applicants had necessarily been Navient clients. But misleading information from servicers, including the company, is “hugely related” to the fact that such a small proportion of applicants to the program were accepted, said Persis Yu, a staff attorney with the National Consumer Law Center and the director of the organization’s Student Loan Borrower Assistance Project.
“When you have this huge disparity between the number of people applying and claiming that they are entitled to a benefit, and the number of people actually receiving a benefit … that’s the system breaking down and failing,” she said.
As ongoing activism across the country has put teacher pay front and center in the national conversation, many teachers say that student debt is also a significant source of financial strain.
“Just like every other teacher, I struggle to make my mortgage payments, to pay for day care, to keep food on my table—I struggle every day,” said Megan Nocerino, one of the teacher plaintiffs in the lawsuit.
“When you trust someone with a loan, or with your credit, or with anything—they should have your back,” said Nocerino, a middle school literacy teacher in Florida. “Navient should have had my back, and they didn’t.”
Student debt is an “epidemic” among educators and other public service workers, said AFT President Randi Weingarten, in a statement. “No one goes into public service to strike it rich; they do it out of a deep commitment to students, patients, and the public good,” she said. “But we cannot attract the best and brightest to these careers if promises of debt relief are deliberately broken.”
‘No Mechanism for Accountability’
When Nocerino’s youngest son was born with severe kidney problems, she called Navient to ask about repayment options. Navient told her, incorrectly, that she wasn’t eligible for forgiveness because she had taken leave from her teaching job under the Family and Medical Leave Act. The company repeatedly recommended forbearance—an option that allows borrowers to temporarily stop making loan payments, though interest on the loans continues to accrue.
Nocerino followed the servicer’s recommendations, entering into forbearance multiple times over the course of five years. She would have been making payments toward the loan-forgiveness program that whole time, instead of entering into forbearance, she said, if she had known she was eligible.
Other plaintiffs in the lawsuit claim that Navient told them they were “on track” for forgiveness when in fact, they didn’t have the right type of loan or repayment program. The suit also alleges that Navient told borrowers the company didn’t offer the loan-forgiveness program, without telling them that another servicer, FedLoan, administers the program.
The AFT-backed lawsuit claims that Navient misled teachers for the company’s financial gain: If a borrower is accepted to the forgiveness program, the loan is transferred to FedLoan, and Navient loses out on servicing fees.
Navient officials declined to comment for this story, citing pending litigation.
The teachers’ lawsuit comes on the heels of other suits against Navient, the result of long-standing concerns about the borrower’s practices. In 2017, the Consumer Financial Protection Bureau accused the company in a lawsuit of offering misleading information, processing payments incorrectly, and not responding to consumer complaints. Five states have also filed suits against the servicer.
While the problems borrowers have had with Navient are well-documented, it’s not the only loan servicer engaging in bad practices, said Yu. Receiving incomplete or conflicting information from representatives is common throughout the industry, she said.
The AFT’s lawsuit argues that the Education Department, which contracts with Navient and other companies to service student loans, isn’t doing enough to curb these issues. In March, the department issued a rule that states didn’t have the authority to regulate federal loan servicers.
“There’s really no mechanism for accountability for borrowers who are having bad experiences with their servicers,” said Julie Margetta Morgan, a fellow with the Roosevelt Institute, a liberal think tank. “Those people are really depending on the Department of Education to step up, and instead they’re turning a blind eye.”
The department did not provide a comment by time of publication.
Lack of Information
Jason Delisle, a resident fellow with the conservative American Enterprise Institute who studies student loan programs, said that not all of the blame for the vast number of rejected applications lies with loan servicers and the department.
“Providing incentives and benefits to teachers through loan forgiveness is inherently complicated and administratively fraught,” said Delisle. “The program is designed in such a way that it creates lots of opportunities for someone to be confused.”
And Yu said that while guidelines for the program are outlined on the Education Department’s website, borrowers may not know who they can turn to help make sense of them.
Loan servicers are required to tell borrowers about their repayment options, but how they provide that information can vary. Servicers don’t have to give “financial counseling,” said Yu, explaining how the ins and outs of each program would best fit individuals’ needs.
Beyond the teacher plaintiffs in the AFT-backed lawsuit, other K-12 educators have also said that the forgiveness program’s rules are unclear and their servicers’ guidance insufficient. David Cummings, a high school teacher in Vancouver, Wash., who is not involved in the lawsuit, said he didn’t know that he needed to be on an income-driven plan, which scales payments according to the borrower’s income, to qualify for the loan-forgiveness program. By fall of 2017, he thought he had been making payments toward forgiveness for 10 years.
But when he called his loan servicer, Mohela, with a technical question as he prepared his application, a representative told him it wouldn’t be accepted because he wasn’t on an income-driven repayment plan. He would have to switch plans and make payments for another 10 years—at which point he would have paid off all of his loans, with no balance left to forgive. Hearing this was “crushing,” said Cummings.
Now, he will continue his payments—about $150 a month—until his graduate school loans are paid off. He had planned to put the money toward family expenses, including hospital bills from his daughter’s birth. He feels lucky to have manageable payments, as he knows people with much more student debt than he has. But he’s still frustrated by the loan forgiveness application process. “I don’t understand why, if you’re a teacher, you’re not automatically enrolled in this,” he said.
Raymond Bayer, the executive director of Mohela, said in an interview that all borrowers receive a welcome packet with information about available repayment options when their loan is transferred to the servicer. Repayment options are also listed on the back of every paper bill, he said.
When borrowers start repayment, Mohela informs them that they will be enrolled in a standard plan unless they take action, said Bayer. If a borrower asks about Public Service Loan Forgiveness during a phone call with a representative, Mohela automatically sends them an application for the program, he said.
Cummings said income-driven repayment plans weren’t ever discussed with him during any phone call prior to September 2017. He said he may have received paperwork that listed Public Service Loan Forgiveness as an option—he also remembers seeing it listed on Mohela’s website—but he was never explicitly instructed that he would have to be on an income-driven repayment plan to qualify for loan forgiveness.
He thinks servicers have a responsibility to do more to guide teachers through the process.
“We’re not necessarily finance experts, and especially not student loan experts,” he said. “We take them on begrudgingly and reluctantly, so we can do something that we love to do.”
