- Sen. Elizabeth Warren led a letter to student-loan company Navient on its debt relief process.
- The lawmakers criticized Navient's process to discharge debt for defrauded borrowers.
A group of Democratic lawmakers wants answers from a major student-loan company on its debt relief process for the borrowers it services.
On Thursday, Sen. Elizabeth Warren led 17 of her Democratic colleagues — including Sen. Bernie Sanders and Rep. Ayanna Pressley — in requesting more information from Navient on how it handles debt discharges for borrowers who said they were defrauded by the schools they attended.
The issue at play: There's a process for borrowers with federal student loans to apply for a debt discharge if they can prove they were defrauded by their school. It's known as the borrower defense to repayment. President Joe Biden's Education Department has canceled debt for millions of borrowers over the past few years under that process.
However, borrowers with private loans managed by Navient cannot access the federal process. They can request a school misconduct discharge application from Navient to attempt to get rid of their loans, but some borrowers previously told Business Insider that the process is lengthy and burdensome, leaving some of them with discharge denials they struggled to understand.
The lawmakers wrote in their letter to Navient — first viewed by BI — that borrowers are continuing to be "improperly" rejected for relief, and they want updated information on how the company is carrying out the process.
"It has been decades since Navient originated many of these loans, and defrauded borrowers are now repaying triple their original loan amount due to subprime interest rates on loans that should have never been originated in the first place," they wrote. "Congress and regulators need accurate information on how many borrowers are eligible for relief to ensure that Navient is following the law with respect to these predatory loans."
Warren led a letter to Navient in April on the same topic, noting Navient's authority to discharge fraudulent loans under a consumer protection tool known as the Holder Rule. Navient responded to Warren's initial letter, reviewed by BI, saying that the process was "still in its early stages" and "as the process continues to roll out, we expect that more borrowers will submit applications, leading to increased levels of cancellation."
The company also affirmed to Warren that it was "committed to addressing valid school misconduct claims" to fulfill its responsibility under the Holder Rule. However, the lawmakers said that they're concerned Navient is continuing to narrowly define qualifications for discharge, resulting in borrowers being denied relief without sufficient explanations.
BI previously reviewed a denial from Leandro Pucci, a 59-year-old borrower who applied for a discharge. It stated that while Navient "carefully considers a variety of factors in determining whether a private loan should be discharged based on school misconduct," the borrower did not meet the requirements.
"I basically work for Navient. Every paycheck I get goes to Navient," Pucci said. "The stress has been really killing me. I feel so defeated. I feel trapped, and this has been so traumatic, especially the last couple of months, it's been really, really difficult."
The lawmakers requested Navient provide more information on the process, including the number of borrowers the company alerted to the school misconduct discharge application, the number of applicants for relief, and the number of applicants who have been denied.
"Navient should cancel all of the fraudulent debts for borrowers who have been harmed by this misconduct, all of whom Navient is able to identify without an application," they wrote.