Sen. Elizabeth Warren (D-Mass.) called out the student loan servicer Navient on Monday — blasting the company over its response to a federal lawsuit.
Navient was sued in January after the Consumer Financial Protection Bureau (CFPB) accused the company of failing to adequately inform student loan borrowers of their repayment options, pushing them toward more costly options.
The CFPB estimated that Navient "added up to $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances" and that "a large portion of these charges could have been avoided had Navient followed the law."
Forbearance allows borrowers to delay payments but ultimately adds interest to the outstanding debt. That extra interest could be avoided if borrowers opted for income-based repayment plans, which offer more manageable monthly payments based on a percentage of a borrower’s income.
In a legal filing recently obtained obtained by Bloomberg, the company argued that federal law didn't require it to counsel consumers.
In a Facebook post, Warren called the company's response "appalling." She also questioned the federal government's contractual relationship with Navient in light of its attitude toward borrowers.
"The federal government paid this company more than $100 million last year to help borrowers manage their student loans, yet this company doesn’t believe it should to try to act in the best interest of students?" Warren wrote. "Then why the heck is the Education Department still paying them?!"
The senator added: "This is exactly why students everywhere need a strong CFPB — to go after sleazy student loan companies like Navient that believe it’s fine for them to cheat students on the federal taxpayers’ dime."
ATTN: has previously written about the value of understanding different student loan repayment options. Experts have pressed borrowers to consult their loan servicers for information about, for example, income-based repayment options; and they've discouraged certain plans that Navient allegedly promoted to its consumers such as forbearance, which could exacerbate debt by accruing interest.