Lori Meadows
Navient, a student loan servicing company, has been accused of engaging in unfair and deceptive practices, such as making predatory subprime loans to students and promoting cosigner release benefits while implementing requirements designed to ensure that very few co-signers were released. As a result of a settlement, Navient has been banned from federal loan lending and is required to pay restitution to affected borrowers. If you have a Navient loan and are considering stopping payments, it's important to understand the consequences, which may include the loan going into collections, legal action, and a negative impact on your credit score. Additionally, staying on top of payments can prevent wage garnishment.
| Characteristics | Values |
|---|---|
| Student loan servicer | MOHELA |
| Loan type | Federal, private |
| Private loan debt relief eligibility | Borrowers who took out private subprime student loans (made to borrowers with low credit scores) through Navient’s predecessor, Sallie Mae, between 2002 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021 |
| Debt relief eligibility (other) | Certain other, non-subprime private student loans made by Sallie Mae Bank and certain other lenders between 2002 |
| Debt relief eligibility (address) | Mailing address on file with Navient as of June 30, 2021, must be within Massachusetts, Arkansas, Kansas, Michigan, Rhode Island, South Carolina, West Virginia, Vermont, or associated with a military address postal code |
| Consequences of non-payment | Loans will go into charge-off status, tanking credit for a long period, lenders will send letters demanding payment, and eventually the entire amount in full; lenders may sue and obtain a default judgement, potentially garnishing paychecks and impacting future asset purchases |
| Avoiding wage garnishment | Pay a small amount ($50 or less) per month during the voluntary payment phase |
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What You'll Learn
Declare bankruptcy if you have no assets
If you have no assets and are considering declaring bankruptcy to discharge your student loan debt, there are a few things you should know. Firstly, it is difficult but not impossible to discharge student loan debt through bankruptcy. Both federal and private student loans can be discharged in bankruptcy, but it is often considered a last resort due to the potential impact on your credit score and the costs and time involved in the process.
To discharge your student loans in bankruptcy, you must demonstrate "undue hardship". This means that you need to show that you are unable to maintain a minimal standard of living if you have to continue making payments on your student loans. The court will decide whether you meet the criteria for undue hardship, and if your federal student loans are involved, the judge will also ask the federal government for their input.
If you are considering bankruptcy, it is essential to understand the different types of bankruptcy cases: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, you ask the judge to cancel all your debts, but you must have an income below a certain threshold to qualify. On the other hand, a Chapter 13 bankruptcy involves reorganizing and lowering your debt through a repayment plan set by the bankruptcy court, typically lasting 3 to 5 years. There is no income requirement for Chapter 13, but you must stick to the repayment plan for the court to cancel the remaining debt.
While bankruptcy can provide a path to discharging student loan debt, it is a complex process with potential long-term consequences. It is always recommended to consult with an experienced bankruptcy attorney to understand your options and make an informed decision. They can guide you through the legal process, including filing the necessary paperwork and representing you in court. Remember, declaring bankruptcy is a significant decision that should be carefully considered, especially if you have no assets to begin with.
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Seek eligibility for a Borrower Defense to Loan Repayment discharge
If you're looking to avoid paying your Navient student loan, one option to explore is seeking eligibility for a Borrower Defense to Loan Repayment discharge. This route is applicable if you believe you were defrauded by your school or were a victim of predatory lending practices.
Firstly, it's important to understand what constitutes school fraud. The US Department of Education has identified certain schools that have defrauded students, entitling them to partial or total loan forgiveness under the Borrower Defense programme. If your school is on this list, your claim is more likely to be approved. So far, all schools found guilty of fraud have been for-profit institutions.
To initiate the process, you should visit the Borrower Defense page on studentaid.gov. You can start your application online or download a PDF to fill out manually. The Department of Education prefers that you submit your application online. However, if you choose to fill out the PDF, you can email it to [email protected] or mail the printed version.
It's worth noting that the concept of "school misconduct" justifying loan discharge has existed since the passage of the Higher Education Act in 1965. However, the regulations were sparse and left many questions unanswered. As a result, only a handful of people applied for this type of loan discharge until the Obama administration, which saw a record number of approved claims.
While seeking eligibility for a Borrower Defense to Loan Repayment discharge can be a viable option, it's important to remember that each case is unique. The outcome of your application will depend on various factors, and you may receive a full or partial discharge or even no relief at all. Additionally, the process may take time, with the Department of Education required to approve or deny applications within 18 months of submission.
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Understand your rights and responsibilities if you default
If you default on your Navient student loan, it is important to understand your rights and responsibilities. Firstly, defaulting on your loan will result in a significant default charge, causing your balance to increase by approximately 20% overnight. Additionally, Navient may pursue wage garnishment and place a judgement against any future assets you acquire. While they are not likely to sue, they may send letters demanding full payment or offering settlements. If you are unable to make payments, it is crucial to prioritize your basic needs, such as food and housing.
It is important to note that defaulting on your loan will have a severe impact on your credit score, as described by one individual who defaulted on their private student loans in the early 2000s, resulting in damaged credit for a decade. In this case, the lender continuously sought payment through letters and eventually demanded full payment. However, the loans were discharged, and the individual received tax consequences for the forgiven debt.
To understand your rights and explore possible options, it is recommended to consult with a bankruptcy or student loan lawyer. While private student loans are generally protected from bankruptcy, there may be exceptions. For instance, if you have no assets, declaring bankruptcy could be an option to consider. Additionally, if your school misled you, you may be eligible for private loan forgiveness from Navient.
If you believe you have been wronged by Navient, you can consider filing a student loan complaint with the Consumer Financial Protection Bureau (CFPB), which oversees private student loans. In some cases, Navient has offered rare private student loan forgiveness to borrowers defrauded by their schools. Additionally, Navient settled with state attorneys general, resulting in debt cancellation for borrowers who attended for-profit colleges with low graduation rates. Understanding your legal options and staying informed about ongoing lawsuits and settlements can help you navigate your rights and responsibilities in the event of a default.
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Consult an attorney
If you are struggling to pay off your Navient student loan, consulting an attorney can be a good option. They can help you understand your rights and responsibilities, as well as guide you through the legal process of dealing with loan repayment issues.
Firstly, an attorney can advise you on the potential eligibility for debt relief or loan discharge. For instance, if your school engaged in misconduct or violated certain state laws, you may qualify for a "Borrower Defense to Loan Repayment" discharge for your federal student loans. Additionally, if you took out private subprime student loans through Navient's predecessor, Sallie Mae, between 2002 and 2014, and had a consecutive period of delinquent payments, you may be eligible for private loan debt relief.
Secondly, an attorney can help you understand the implications of defaulting on your loan. If you stop making payments, your loan will likely go into collections, and Navient may take legal action against you and any cosigners. An attorney can explain your options and the potential consequences, such as wage garnishment and asset judgments.
Moreover, an attorney can provide guidance on bankruptcy as a potential option if you have no assets. They can clarify whether declaring bankruptcy will discharge your private student loans or if they are protected from bankruptcy proceedings. This can be a complex process, and an attorney can help you navigate it effectively.
By consulting an attorney, you can gain a better understanding of your legal rights and options, as well as make informed decisions regarding your Navient student loan repayment. They can provide personalized advice and support, ensuring you are aware of all the possible avenues to manage your loan effectively.
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Consolidate federal loans by December 31, 2023
Navient has transitioned its student loan servicing to MOHELA, a non-profit, governmental corporation dedicated to helping families successfully repay their student loans. If you have any questions related to your loans, you can visit servicing.mohela.com.
Now, for those looking to consolidate federal loans, there is a critical deadline of December 31, 2023, that you need to be aware of. This deadline is associated with a Biden administration student loan forgiveness initiative, specifically the IDR Account Adjustment. Borrowers with commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans should apply for a Direct Consolidation Loan by this date to receive the full benefits of the one-time account adjustment.
It is important to note that only government-held federal student loans qualify for the IDR Account Adjustment. This includes Direct federal student loans and some government-owned FFEL-program loans. FFEL was an older loan program where private, commercial lenders originated government-backed federal student loans.
By consolidating your loans through the federal Direct Consolidation Loan program, you may be able to get all of your loans forgiven simultaneously. Additionally, borrowers can maximize their IDR and PSLF credit under the adjustment if they consolidate loans with different repayment histories. However, it is worth mentioning that the borrower's IDR and PSLF credit may temporarily reset to zero after consolidating but will be readjusted in 2024.
While the deadline is currently set for December 31, 2023, there is a possibility that the Biden administration could extend it to July 1, 2024, due to the timing of this deadline relative to the full implementation of a separate student loan repayment program and ongoing loan servicing issues.
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Frequently asked questions
If you stop paying your loan, it will eventually go to collections, and they will likely sue you and any cosigner(s) you may have. Your credit score will also be affected.
Navient has transitioned its student loan servicing to MOHELA. If your school has misled you or engaged in other misconduct in violation of certain state laws, you may be eligible for a "Borrower Defense to Loan Repayment" discharge for your federal student loans.
Navient has settled with the CFPB and is banned from engaging with Federal Loan lending. They must pay restitution to Federal loan borrowers who were steered into costly repayment plans and not told about IDR payments.
