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In Lawsuit, Teachers Claim Loan Provider Misinformed Them on Debt Forgiveness

Navient-headquarters-article.jpgNine teachers have filed a class-action lawsuit against the student-loan provider Navient, alleging that the company impeded them and other eligible public employees from participating in a federal loan-forgiveness program. The suit is financially supported by the American Federation of Teachers.

"Navient has purposely and systematically trapped teachers, nurses, and other public service workers under a mountain of student debt instead of providing them with accurate information about their loan options and the loan-forgiveness programs they qualify for and deserve," said AFT President Randi Weingarten, in a statement.

The Public Service Loan Forgiveness program erases student debt for certain classes of public-service workers, including teachers, after borrowers make 120 monthly payments toward their loans over the course of 10 or more years.

To be eligible, borrowers must be on a repayment plan that qualifies under the program. Most of these qualifying plans base monthly payments on income. The lawsuit claims that Navient, formerly known as Sallie Mae, recommended otherwise eligible borrowers for non-qualifying plans and provided misleading information—including telling borrowers that payments would count toward loan forgiveness when they would not.

The suit alleges that Navient provided this misleading information for financial gain. Only one loan service provider, FedLoan, is authorized to administer this loan-forgiveness program. When Navient borrowers certify that they work for a qualified employer and are on a qualified repayment plan, their loans are transferred to FedLoan, meaning Navient loses out on servicing fees.  

Navient declined to comment on the lawsuit.

Michelle Means, a 1st grade teacher in Maryland and one of the plaintiffs, recounted her experience with Navient in the New York Times. Means said a representative for the lender told her that she would have to make all of her 120 loan payments consecutively to be eligible for the loan-forgiveness program, and that missing even one payment would disqualify her.

This isn't the program's policy—borrowers can miss a payment and maintain their eligibility—but Means was deterred from participating. As a result, the AFT says, Means will have to make thousands more dollars in payments than she would have if she had participated in the loan-forgiveness program.

Borrowers officially apply for the program at the end of their repayment period—either 10 years from when they start making payments or after they make 120 payments. The U.S. Department of Education started receiving applications in 2017.

Of the 28,000 applicants who submitted by June of this year, only 96 were approved (or less than half of 1 percent of applicants). Most of the rejected applications didn't meet the requirements for eligible payment schedules or qualified employers, according to a report from the department.

The AFT noted this statistic in their statement on the lawsuit, and said that "the program has been mishandled and undermined by the Department of Education's contracted servicers."

In general, teachers say that student debt is a persistent worry.

In an AFT survey of its members earlier this year, eight in 10 respondents said debt was "a major burden or challenge." Last year, a survey of 2,000 teachers conducted by National Public Radio's education team found that one in four teachers said they were "terrified" about making student-loan payments.

Many teachers may not be aware of financial options available to them for managing student debt. A 2014 report from the think tank Third Way found that only 32 percent of current and incoming teachers knew about the federal loan-forgiveness program, even though about two-thirds of teachers borrow to pay for their education.

Photo: The headquarters of student loan debt collector Navient Corporation, in Wilmington, Del. —William Bretzger/The Wilmington News-Journal via AP-File

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