If you're aiming to zero out your student loans ahead of schedule, pay attention to how your loan servicer handles those extra payments.
The Consumer Financial Protection Bureau announced Wednesday it is suing federal and private student loan servicer Navient, saying the company has been "systematically and illegally failing borrowers at every stage of repayment." Attorneys general for Illinois and Washington state, who had teamed up with the bureau on the multi-year investigation, filed their own suits against Navient Wednesday.
Among the CFPB's charges, Navient — formerly part of Sallie Mae — allegedly steered struggling borrowers into forbearance when they might have qualified for income-driven repayment plans, and did not adequately keep borrowers in income-driven plans informed of critical deadlines to maintain their eligibility.
Borrowers aiming to get ahead on their loans by making extra payments may also have been burned. The suit alleges Navient often processes such payments incorrectly, resulting in late fees, interest charges and negative reports being sent to credit reporting agencies.
"Navient repeatedly misapplies or misallocates payments — often making the same error multiple times over many months," the CFPB said in its announcement. "The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company."
In a statement released in response to the CFPB's suit, Navient said the allegations are unfounded and politically motivated.