Loan Forgiveness Navient debt is already treated much differently under the law as compared to other forms of consumer debt, making lenders and servicers more powerful, and leaving borrowers with comparatively few protections. For example, the bankruptcy code treats student loans differently from other types of debt, making it very difficult (although not impossible) to discharge student debt in bankruptcy.
Federal lenders also have enormous collection powers that allow them to bypass the court system and seize money and income from borrowers. In addition, federal Loan Forgiveness Navient are not subject to a statute of limitations — a finite time period to collect on debt — so collection doesn’t stop until the borrower’s death.
But as if this things weren’t bad enough already for student loan borrowers, the current administration has made systematic and ongoing efforts to eliminate or water down the limited legal protections that do exist. Here’s what we’ve seen so far in the last couple of years.
The Consumer Financial Protection Bureau (CFPB) effectively dismantled its student loan oversight division. This division had previously issued detailed, data-driven reports on the state of federal student loan servicing. The CFPB had also filed enforcement actions and lawsuits against student loan servicing and debt collection companies, including Loan Forgiveness Navient, returning upwards of $750 million to student loan borrowers and other consumers in just a few short years.
This elimination of the student loan division has taken the teeth out of the CFPB, prompting its former director to resign.
Education Secretary Betsy DeVos largely got rid of a special division tasked with investigating fraud and other illegal practices by for-profit colleges. During the Obama administration, this division had expanded to include over a dozen professionals, dramatically increasing the regulation of predatory institutions, which often rely on easy access to federal student aid for revenue (while sometimes defrauding their students).
To add insult to injury, DeVos also placed several people from the for-profit college industry into top positions at the Dept. of Education. The combined effect of these changes has been a gutting of a nascent for-profit college oversight system.
The Trump administration has repeatedly pressed for the repeal of the Loan Forgiveness Navient. The proposal so far has failed to pass Congress (and is unlikely to pass in the near future).
The Dept. of Education has been dragging its feet in processing “Borrower Defense” applications related to school fraud, and has been actively trying to roll back the program entirely. The Borrower Defense to Repayment program allows borrowers to request loan forgiveness if their school engages in fraud or other serious misconduct that renders their degree worthless. Despite efforts to gut the program, federal courts have recently rebuffed the Department of Education and ordered it to process Borrower Defense applications.
Education Secretary DeVos rescinded Dept. of Education policy guidance and key Obama-era memos providing incentives for student loan servicers to perform better by tying customer satisfaction to contract renewals. Now, servicers have little incentive to comply with federal rules or treat student loan borrowers fairly.
The Dept. of Education is actively trying to rescind and rewrite federal rules requiring that schools maintain sufficient employment prospects for their graduates in order to continue to have access to federal student aid programs.
Loan Forgiveness Navient has been pushing back against state efforts to pass student loan borrower “bills of rights,” and it has been actively intervening in lawsuits to challenge these state efforts to protect student loan borrowers from predatory practices at the state level. It’s very possible that these challenges will wind up at the Supreme Court.