David Healey went back to school in 2008. He paid for it with a student loan from Sallie Mae, a corporation that once serviced most of the nation’s federal education loans before expanding into the private loan business. Then he deferred his loan.
At least that’s what he thought.
During that time, in 2014, an offshoot company called Navient took over the loan from Sallie Mae. Along with Healey’s loan, Navient took over the millions of accounts comprising Sallie Mae’s entire student loan portfolio.
When companies package and resell debt, things can go wrong, with sometimes lasting consequences. But whose fault is it? And what steps can borrowers take to undo the damage?
In June 2015, Navient told Healey his loan was past due. Healey was still a student, and understood the loan was still in deferment status. The representative tried to verify his information, but realized that the postal and email addresses on the account belonged to someone else, perhaps explaining why he never received any communication from the company about repayment.
At the end of school, some students enter into standard 10-year, fixed payment plans. But for some borrowers, that’s not affordable, and many opt into repayment plans that last 20 years, or longer. During the course of the loan, servicers can sell and resell student loan debt, and when that happens — as it did for Healey — the process is not always seamless.
The Navient representative told Healey she put the loan back into deferment status, and he would receive an updated statement in the mail. When a month passed and he received nothing, he called back. Healey couldn’t believe it when the phone representative revealed all his account information was still incorrect, including the deferment status of the loan. “Finally, she told me my loan was deferred until May 2016, and that I didn’t need to make a payment,” Healey recalls. “I told her, ‘That sounds perfect, actually.'”
Well, it sounded perfect.
But in late September, Healey came home to a UPS letter from Navient, telling him he would be sued if he didn’t make a payment. He immediately called Navient and the phone representative told him he could pay $50 to defer the loan until November, when it would be due.
But that wasn’t all Navient told him. It assured him that making the $50 payment would remove any possible negative information that may have been reported to the credit bureaus, something Healey was legitimately concerned about. According to Healey, Navient acknowledged the account status was its own mistake and had been out of Healey’s control. Healey paid the $50 and thought the situation was fixed.
In December, Healey was turned down for a car loan. Perplexed by being unable to secure an auto loan, Healey ordered his credit report. He quickly realized his problem with Navient was bigger than he previously understood.
“I discovered Navient was reporting my loan as 60/90/120 days late,” Healey tells us. “Along with the late payments, the reports showed the two different incorrect addresses they read to me over the phone when we spoke.”
The problem Healey tried to solve by dealing directly with Navient has ballooned into something much bigger, and is now affecting his ability to get other types of loans. It seems Healey isn’t the only one questioning Navient’s operations, however. Navient has been the target of consumer activists who claim the company treats customers unfairly. Over the last year, Sen. Elizabeth Warren (D-Mass.) has been pushing for a full investigation into Navient’s practices, following investigations and enforcement proceedings against the company led by the Department of Justice, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau.
And student loans are a big business — really big. In 2015, there was an estimated $1.3 trillion in outstanding student loan debt, and that number continues to grow with the increasing costs of higher education. According to a report by the Institute for College Access and Success, the average borrower owes more than $28,000 in student loan debt, with an average monthly payment of $292.
So what can borrowers do if their loan servicer reports erroneous information to the credit bureaus?
In Healey’s case, when he realized going back to Navient was a lost cause, he disputed the information with the three credit bureaus: Equifax, Experian and TransUnion. Information on how to dispute errors on your credit report can be found on the Federal Trade Commission website.
He also filed a complaint with the Consumer Financial Protection Bureau, which has a special department dedicated to helping borrowers work out problems with their student loan servicers. The CFPB gave Healey a tracking number and opened an investigation.
Within 15 days, Navient responded to his CFPB complaint, requesting an additional 60 days (as allowed under the law) to complete its investigation. Healey currently awaits the outcome of his dispute with the credit bureaus and his complaint to the CFPB. Our advocacy team could reach out to Navient executives if the CFPB can’t help, but it’s unclear what kind of response we would receive. In the meantime, Healey is making monthly payments on his loan account, doing everything within his power to improve his credit score, which was damaged through no fault of his own.
Update: After complaining to the CFPB, Healey heard from Navient’s customer advocate. Navient took the necessary steps to remove the negative information from his credit report. The company insists Healey is still responsible for late fees.