Navient, the third largest student loan servicer in the country, directed borrowers toward higher cost repayment plans and did not offer better options, according to a 2017 audit by the U.S. Department of Education.

The department did not make requirements or sanctions and simply offered recommendations for the company.

The Associated Press obtained a copy of the audit from Sen. Elizabeth Warren’s (D-MA) office. It was not shared with plaintiffs in federal and state lawsuits against the student loan servicing company. Washington, Mississippi, California, Pennsylvania, and Illinois are suing the company, alleging that its action breaks consumer protection laws. The Consumer Financial Protection Bureau’s (CFPB) lawsuit has said Navient’s actions were deceptive.

For the audit, the department listened in on 2,400 calls to borrowers from 2014 to 2017. Nearly one out of 10 calls featured a representative who did not offer all of the options they could have offered, such as income-based repayment options. These representatives did not ask questions to find out if the borrower would have benefited from such a plan, according to the audit.


The CFPB’s lawsuit has said Navient’s actions were deceptive and that between 2010 and 2015, the company added around $4 billion in interest to those borrowers’ loans through overusing forbearance. When loans are in forbearance, they still accumulate interest and are more costly to the borrower in the long term. In its lawsuit, the CFPB said Navient’s compensation policies for customer service representatives incentivizes these practices. It compensates them on average call time, and employees know that lengthy conversations, as ones about someone’s full financial picture tend to be, would be detrimental to them, the suit argues.

Earlier this year, a CFPB attorney told a judge that the Education Department refused to send documents of Navient’s loan management. The CFPB is dealing with its own changes and was restructured under the Trump administration. Its acting director, Mike Mulvaney, ended the student lending office’s operations, which included student loan services and lawsuits against for-profit colleges. A top official there, Seth Frotman, was forced to handle only financial education issues and left the agency, accusing it of failing borrowers.

Navient defended itself to the AP by saying that for nine of 10 of those calls, borrowers were offered all of their options and that its record is about the same or better than other student loan companies. But that doesn’t say much for Navient, considering that many student loan servicers fail borrowers. In 2015, the Consumer Financial Protection Bureau released a report on borrowers’ experiences with student loan servicers that found that servicers failed to proactively mention income-based repayment plans when borrowers were struggling to make payments. Instead servicers often suggested forbearance or deferment or simply insisted borrowers make the full payment on their loans.

Navient’s actions could be affecting as many as 76,200 borrowers, the AP reported.

Navient told the AP, “We (are not) aware of any requirement that borrowers receive all of their repayment options … on each and every call” and that the department needs a new contract with the servicer if this is the case.


Liz Hill, an Education Department spokesperson, told the AP the audit wasn’t shared because it was “performed the review as part of its own contract oversight, not for the benefit of other agencies” and added that “Nothing in the report indicates forbearances were applied inappropriately.”

Sen. Warren tweeted that Navient’s CEO should be “held accountable” for “sabotaging students.”

Student loan giant @Navient denied allegations that it cheated student borrowers – while sitting on a federal audit that proved it had done just that. The CEO should be held accountable for 1) sabotaging students in the first place, and 2) lying to the public to cover it up. https://t.co/gdaC9NZjeE — Elizabeth Warren (@SenWarren) November 20, 2018

The department’s lack of action on this issue is consistent with its handling of student debt issues since Education Secretary Betsy DeVos stepped into her role. In April of 2017, DeVos reversed Obama-era directives that were supposed to make it easier for borrowers to pay back their loans and hold student loan servicers accountable. Then-Education Secretary John King had written in the guidance, “Improper or abusive customer service speaks to a disregard for student and debtor needs that does not meet the standards we have set.” DeVos also withdrew a directive that required servicers meet certain standards for responding to and assisting borrowers.

The department has also fought for more than a year to delay Obama administration protections that enabled borrowers who were defrauded by their colleges to have their federal loans forgiven. According to a New York Times report published in May, the department dismantled a team that looked into abuses at the types of colleges that defrauded students say often engage on predatory behavior — for-profit colleges.