Up to 500,000 student loan borrowers who declared bankruptcy and assumed (wrongly) that their student loans would be discharged stand to get relief through a class action lawsuit.
About 30,000 of these student loan borrowers had their loans through Navient, who refused to discharge the loans and has continued to levy charges and interest on the borrowers.
The borrowers are suing in the U.S. Bankruptcy Court for the Eastern District of New York.
“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,” Austin Smith, one of the attorneys representing the plaintiffs for the case, has told Yahoo Finance. “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 want Navient to stop collecting on the already-discharged loans and compensate the borrowers for what’s already been paid.
“We have tried informally to get Navient to stop, and they have refused to stop,” Smith added. “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 they win, attorneys involved in the case say 30,000 borrowers involved in this case with these “loans” would obtain relief while 250,000 to 500,000 borrowers with similar loans from other lenders nationwide could also stand to win.
As Yahoo Finance reports, the issue arose more than a decade ago, when a student loan borrower filed for Chapter 7 bankruptcy and requested for a discharge of his student loans. The borrower had owed slightly more than $12,000 to Sallie Mae, which today is known as Navient. The court had ordered discharge of those loans in 2009.