WASHINGTON — Sen. Elizabeth Warren, D-Mass., has accused Navient's chief executive of false statements related to allegations of improper practices facing the student loan servicer.
In a letter to Navient CEO Jack Remondi, Warren claims that he denied the merits of a lawsuit by the Consumer Financial Protection Bureau alleging that Navient had steered struggling borrowers into expensive loan forbearance programs. But at the time, Warren said, Navient was being audited by the Department of Education.
The Department of Education audit, performed in 2017, was disclosed Tuesday in reporting by The Associated Press.
"It appears that, while the company was publicly stating that there was no truth to the allegations about Navient's misbehavior by CFPB, the company had received an official Education Department audit that revealed your company was not meeting federal standards or adequately servicing student loan borrowers," Warren said in the letter, dated Nov. 13. "You made these same denials to me privately — compounding the problem by denying the existence of any third party audit that identified Navient's failures."
But in a direct response to Warren and a separate shareholder letter, Remondi stood by his earlier statements and took issue with Warren's interpretation of the government audit.
“I stand by my responses to your questions in our meeting in June. I continue to be unaware of any reviews or audits that support the claims that Navient somehow systematically steered borrowers into forbearance," Remondi said in a letter to Warren, dated Nov. 15. "This particular Federal Student Aid review, when viewed as a whole, as well as a dozen of other audits and reviews, show that Navient overwhelmingly performs in accordance with program rules while consistently helping borrowers choose the right options for their circumstances.”
Warren said the audit has "bolstered the allegations" against Navient and "found the company was not adequately servicing student borrowers.”
“Navient needs to explain the appalling findings of this audit and why the company denied that it existed,” she wrote.
The CFPB’s lawsuit alleged that Navient added up to $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearance plans.
Warren said Remondi met with her in June to discuss the ongoing lawsuits against Navient. She said she asked Remondi if he was aware of any third-party analysis of the CFPB’s allegations against the firm, which — according to the letter — he denied.
But the Education Department audit found that out of 388 inbound and 2,000 outbound calls with struggling student borrowers, Navient offered just the expensive forbearance option in roughly 10% of the calls.
Warren said the audit revealed that many students were not given the opportunity to decide if other options, outside of forbearance, were preferable. It also found that many of the student borrowers who spoke with loan servicers at Navient ended up paying more money than if they had never even spoken to the company.
“This finding is both tragic and infuriating, and the findings appear to validate the allegations that Navient boosted its profits by unfairly steering student borrowers into forbearance when that was often the worst financial option for them,” Warren said in the letter.
But Navient has strongly denied that its forbearance plans hurt student borrowers.
“One of the main claims is that enrolling borrowers in forbearance is an inappropriate and therefore deceptive practice. This conclusion is deceptive in itself and shows a lack of understanding of the different repayment options available to borrowers and how forbearance can be both a proper and lower cost option for borrowers," Remondi said in a letter to shareholders released Tuesday. "It also ignores the fact that the option of forbearance was authorized by Congress and no senator has initiated any bill to eliminate it as a valid option.”
Warren is asking Remondi to correct any false statements he made during their meeting and explain the results of the audit by Dec. 4, “given Navient's admitted disregard for the best interests of students, the troubling finding of this ... audit, and your own misleading answers to questions about the existence of this audit.
