Over four years during which he lived in a homeless shelter for a period and sometimes struggled to buy basic necessities, Miguel Rivera sent more than $1,000 to the student loan company Navient
The money didn’t go toward paying down his more than $100,000 in student-loan debt. Rivera sent it in an attempt to cover a $23.39 late fee.
But the student-loan servicer applied the $1,000 instead to the interest on his loan, and the late fee kept showing up, even though Rivera was taking pains to pay it down, according to a lawsuit Rivera filed earlier this year. It alleges that the company misrepresented the amount that Rivera owed each month, leading Rivera to overpay by more than $1,000.
A Navient spokesman declined to comment on pending litigation.
Rivera may be one of many borrowers who’ve been unfairly financially penalized by Navient. Court documents in Rivera’s case cite several complaints to the Consumer Financial Protection Bureau about similar practices by the student-loan servicer, including one complaint where a borrower used their bonus to pay $500 in late fees they thought they owed.
Rivera graduated from college in 1994 and finished grad school, where he accrued the bulk of his student-loan debt, in 2005. He took pains to stay current on his more than $100,000 in student loans despite sometimes inconsistent work, according to court filings. When he couldn’t afford his payments, he made sure to apply for economic hardship deferments and forbearances. When he had a steady job, he made consistent monthly payments, sometimes as high as $772.54 a month. And when he learned that he was eligible for a program that would lessen his debt burden by tying payment amounts to his income level, he signed up.
In April 2015, Rivera was laid off from his job, and he missed one monthly payment, triggering the $23.39 late fee. By 2016, Rivera was enrolled in the government’s income-based repayment program, which allowed him to stay current on his debt, while owing $0 each month because of his small income. Yet, for several years he received billing statements from Navient that read “total payment due” $23.39, according to court documents.
Rivera, who suffered an accident that limited his mobility, would go by “wheelchair, then walker and then cane,” according to court documents, to deposit the roughly $23 in his bank account so he could pay Navient.
Not only did Rivera have a right under the law not to make the late fee payment, but the money he kept sending to Navient for the late fee was applied to the interest on his loan, court documents allege. That meant the late fee kept showing up on his bill, even though Rivera was taking pains to pay it down.
Lawsuit could reveal the extent of the practice
The lawsuit Rivera filed earlier this year over the issue has been winding its way through the court system. If it continues, it could reveal the scope of the billing practice.
“It’s the kind of thing that’s so rare that someone would come across, not because it’s not happening, because there’s just not enough eyes on these things,” said Johnson Tyler, a senior consumer attorney at Brooklyn Legal Services, who is representing Rivera. “The people who are in the income-based repayment plan are the people who are struggling the most, they don’t need a late fee added onto this that they’re not legally required to pay and especially a late fee that will never disappear.”
So far, the suit hasn’t been enough to prevent others from receiving similar bills. As part of the case, Tyler requested an injunction on the billing practice, but the judge ruled Rivera didn’t have standing to make that request because he already knew he’d been deceived. “Once you’ve been hoodwinked, you’re not going to be hoodwinked again,” Tyler said.
Legal services-funded organizations like the one where Tyler works aren’t allowed to file class-action lawsuits. But sometimes other attorneys will file class-action suits on behalf of other clients experiencing the same issue. The hope, Tyler said, is that Navient will reduce its exposure to potential litigation over the issue by changing its billing practices.
A judge denied Navient’s motion to dismiss the suit. The discovery phase of the litigation could reveal the extent of the alleged overbilling.
“This was not a special statement for this guy, so they issued this statement for some time to some category of people,” said Dalié Jiménez, a professor at University of California-Irvine’s School of law. “If that statement is found to be misleading, potentially they have liability to those people, and that could be a lot.”
“If attorneys general were already not looking into this, they should really look at this more broadly as a behavior because it really doesn’t look good,” she added.
Student loan companies have been accused of not doing enough to help borrowers afford payments
Rivera’s lawsuit is one of many to allege that the student-loan companies hired by the government don’t provide enough information, or the right information, to ensure borrowers can access the benefits of the federal student loan program to which they’re entitled.
State law enforcement officials and others have accused these companies, including Navient, of shuttling struggling borrowers into costly repayment programs instead of enrolling them in income-driven repayment plans. In addition, they’ve been accused of misleading public servants trying to access a loan forgiveness program created for them by Congress, delaying their progress towards having their debt discharged, which could have a significant financial toll. (The company ultimately settled the suit).
Still, there hasn’t been much attention given to the “total payment due” practice that’s the subject of Rivera’s lawsuit. “There’s no consequence,” Tyler said. “It’s a non-losing proposition to overbill people, no one challenges them on it.”