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Regulators, Consumers Target Student Debt Servicer Navient

Navient, meanwhile, is aggressively defending itself against the allegations brought by consumers and regulators, asking courts to toss out the state and federal lawsuits.

Cook County Circuit Judge Kathleen Pantle in Chicago held a hearing in July on Navient’s motion to dismiss Madigan’s lawsuit, which the judge is now weighing.

Madigan’s lawsuit, filed in January, alleges some borrowers must contact Navient monthly to “fix the same errors on their accounts,” including how payments are spread across multiple loans or applied to unpaid interest, fees or principal.

“Sometimes the payment was intended to pay off a specific loan, but Navient allocated the payment to all of the loans,” the lawsuit alleges. Decisions on allocating and applying payments could lead to higher interest charges and negative information sent to credit agencies, the suit says.

Assistant Attorney General Michele Casey told Pantle at the July hearing that Navient assured struggling borrowers it would give tailored advice, including whether income-based repayment plans or forbearance would be most suitable.

In reality, Casey alleged, Navient workers were compensated partly by keeping phone calls to under six minutes and therefore steered most borrowers into “one-size-fits-all” forbearance because it got them “off the phone fast.” Casey said that saves Navient money even as its training materials say forbearance should be a “last resort.”

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