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Lawsuits & Litigation

30,000 Student Loan Borrowers are Still Being Charged for Discharged Loans, According to Lawsuit

— February 21, 2020

Navient was recently hit with a class-action lawsuit alleging it continued to pursue payments on already-discharged student loans.

For many people in the U.S. today, student loan debt is like an annoying itch you can’t scratch, it just won’t go away. For some, even when their loans are supposedly discharged, they remain a source of annoyance, especially when the loan provider refuses to acknowledge the loans were discharged. This is exactly what an estimated 30,000 student loan borrowers are currently facing. According to a lawsuit that was recently filed against Navient, the student loan borrowers “thought their private loans were discharged when they declared bankruptcy years ago,” but Navient disagreed and “continued collecting for those loans.” 

Student debt graphic
Student debt graphic; image courtesy of 905513 via Pixabay,

The suit was filed in the U.S. Bankruptcy Court for the Eastern District of New York. One of the attorneys representing the plaintiffs, Austin Smith, said:

“We began these cases in 2016 at a time when there was some confusion in the law regarding what types of student loans couldn’t be erased in bankruptcy. Since that time, more than a dozen courts across the country have agreed with us that these types of student loans are dischargeable and rejected Navient’s increasingly irrational arguments that have sought to prolong and delay this process.”

The plaintiffs suing the student loan provider want Navient to stop collecting on their “already-discharged loans and compensate them for what’s already been paid.” Additionally, in filing the suit the plaintiffs hope to shed light on that fact that Navient has and continues to engage in deceptive behavior that has harmed borrowers. Smith said:

“We have tried informally to get Navient to stop, and they have refused to stop…And Navient refuses to stop because it believes that the profit to be earned today exceeds whatever nominal penalty is imposed tomorrow for violating the law. We are now asking the court to make Navient stop, and stop now.”

If the plaintiffs win the suit, they will receive some sort of financial relief and “250,000 to 500,000 borrowers with similar loans from other lenders nationwide could also benefit.”

The issue that resulted in this suit happened more than 10 years ago when a student loan borrower requested a discharge of his student loans when he filed for Chapter 7 bankruptcy. At the time, the borrower owed a bit more than “$12,000 to Sallie Mae, which today is known as Navient.” In 2009, the court ordered the discharge of his loans. However, Navient pushed back and argued the borrower’s loans were not dischargeable in bankruptcy and continued to pursue debt payments from the borrower. Thousands of student loan borrowers found themselves in similar situations and the recent class-action lawsuit was filed as a result.

A hearing to resolve the matter is schedule for late March.


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