As Philadelphia bankruptcy attorneys we speak to people who are in over their head with student loan debt almost every week. So we have been watching the news very carefully to keep track of developments in the nationwide student loan crisis.
Today’s hot news is a story about a class action law suit against a major student loan servicer called Navient. The name is not well-known because they are an off-shoot of a company you have heard of: formerly the most major student loan servicer in the industry, Sallie Mae. Navient split off from Sallie Mae in 2014.
Who is Suing Navient?
Five entities are suing Navient. They are:
- The Consumer Financial Protection Bureau
- The State Attorney General of Illinois
- The State Attorney General of Washington
- The State Attorney General of Pennsylvania
- The State Attorney General of California
Right now, Navient is trying everything in its power to have these suits removed or dismissed.
The Reasons for the Navient Suit
Each lawsuit names deceptive, abusive, and illegal practices. For example, Navient is alleged to have misapplied or failed to apply borrower payments to their balances. They also tried to steer borrowers into taking options that would make them pay more than they had to.
Lying, strong-arming borrowers and failing to follow consumer protection laws…you’ll find variations on these allegations in just about every lawsuit on offer.
What the Lawsuit Means to Consumers
If these lawsuits are won some consumers might receive restitution or even loan forgiveness. If you are a Navient Customer you could also file a Borrower’s Defense to Repayment (BDAR) claim. This form of defense has been set aside for borrowers whose schools or lenders engaged in fraudulent practices. If the claim is awarded you could be eligible for full student loan forgiveness.
You may even be reimbursed for amounts you’ve already paid on these student loans.
You do not have to wait for the results of the lawsuits to file these claims. It is, however, a good idea to have an attorney in your corner when you try to use the BDAR program. It is all-too-easy to make a mistake which could disqualify you.
What these Lawsuit Could Mean for Bankruptcy Law
These lawsuits will not have any direct impact on whether it will become easier for borrowers to discharge student loans through bankruptcy. However, many judges are growing more lenient on how they interpret current statutes, such as the undue hardship rule. Judges are also pushing for better laws and are recognizing there is a problem.
The conversation is happening, and someday we may be able to report that borrowers can treat student loan debt like any other debt when it’s time to file for bankruptcy.