Democratic lawmakers are targeting a top student loan company for allegedly “improperly” rejecting debt forgiveness applications when borrowers indeed qualified for it under a federal rule.
In a new letter, U.S. Sens. Elizabeth Warren, Bernie Sanders, and other lawmakers claim that they have elevated concerns that Navient’s JSM process for canceling loans for borrowers who were defrauded by schools “is flawed, convoluted, and opaque.”
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After initially sending a letter to the company in April, where they urged Navient to cancel “decades-old, predatory student loans” after it coordinated with “fraudulent for-profit schools” to push loans onto borrowers that were “likely to default,” Navient said that it would comply through an “enhanced process.”
Now, lawmakers are claiming that Navient is withholding vital information about its student loan debt cancellation process after some borrowers have revealed they were rejected from receiving relief, which is sparking concern.
They are suspecting that Navient is “narrowly defining and inaccurately determining” which borrowers, and types of loans, are eligible for cancellation due to its “alarming” definition of a qualifying for-profit school.
U.S. Sen. Elizabeth Warren, a Democrat from Massachusetts, during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, DC, US, on Thursday, March 7, 2024.
“Navient refused to provide much of the information we requested regarding these loans, including how many of its loans are governed by the FTC’s Holder Rule, how many borrowers have requested relief through its new application, and how many have been approved or denied,” said lawmakers in the letter.
The Federal Trade Commission’s Holder Rule allows consumers to cease making payments for a loan if it is defective or fraudulent. The lawmakers claim that when Navient rejects an application for debt forgiveness, it provides “insufficient information” on the reasoning for the rejection, “impairing borrowers’ abilities to exercise their rights.”
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“Since Navient provided our offices with virtually no information regarding how it is adjudicating school misconduct loan discharge applications, including on what basis it denies applications or the criteria it uses to evaluate applications, it is impossible to determine whether the company is upholding its responsibilities under the Holder Rule,” wrote the lawmakers. “We are concerned that the company may be excluding certain schools and certain loans that qualify for relief from its discharge process.”
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The lawmakers encouraged Navient to conduct a “group discharge” of student loans debts from fraudulent schools, and to provide them with basic information on its loan forgiveness process that they requested months ago.
“It is disappointing that Navient has refused to divulge basic information regarding the loans in its portfolio that are eligible for cancellation under the Holder Rule and due to Navient’s misconduct – and disgraceful that you appear to be evading your responsibility to cancel them,” wrote the lawmakers. “As previously requested, Navient should conduct a group discharge for all debts involving fraudulent schools.”
Elizabeth Warren vs. Mohela
This is not the first time Democratic lawmakers cracked down on a major student loan company for botching its debt forgiveness process.
In April, after Mohela allegedly failed to send billing statements to student loan borrowers in a timely manner, miscalculated monthly payments and delayed debt relief, Warren sent a stern letter to Mohela CEO Scott Giles.
In the letter, she invited him to testify at a Congressional hearing to explain why the company faced a plethora of issues with its loan repayment and forgiveness processes.
“Your company has contributed to student loan borrowers’ difficulties by mishandling borrowers’ return to repayment following the COVID-19 pandemic-related pause on payments, interest, and collections and by impeding public servants’ access to PSLF relief,” wrote Warren in the letter.
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