Private Student Loan Discharges for School Misconduct 
Navient’s Practices and Borrowers’ Legal Options

Overview

Borrowers who were misled or defrauded by their schools and ended up with private student loans – especially those issued by Sallie Mae/Navient between 2002 and 2014 – face an uphill battle in seeking debt relief. Unlike federal loans (which have a Borrower Defense to Repayment program), private loans have no comparable government-run discharge program. Navient (formerly Sallie Mae) has quietly implemented its own “School Misconduct Discharge” program for private loans, but reports show it has been opaque and largely unhelpful to borrowers. Below, we summarize what is known about Navient’s handling of these discharge applications (including denial rates and investigations), explain legal grounds and differences from federal loan protections, and outline options for affected borrowers. We also highlight recent lawsuits, regulatory actions, and what reforms may be on the horizon. The goal is to provide clear, actionable insights for borrowers seeking relief.

Navient’s “School Misconduct Discharge” Program and Denial Rates

Navient – one of the largest private student loan holders – created a little-known program in early 2024 allowing borrowers to apply for cancellation of private loans if their school engaged in fraud or misconduct. Notably, Navient did not publicize this program; it was “quietly released” and only came to light through advocacy groups and media reports. Under this School Misconduct Discharge Application process, borrowers submit evidence that their school misled them or violated laws, and Navient then decides whether to discharge the private loan debt.

Investigations by lawmakers and advocates have revealed extremely low approval rates and a flawed process

In late 2024, Senator Elizabeth Warren and colleagues launched a congressional inquiry into Navient’s handling of these applications. They found that Navient only invited a small fraction of eligible borrowers to apply, and then denied relief to about 80% of those who did apply. Specifically, Navient told Congress that as of September 2024 it had identified about 65,000 borrowers who attended for-profit colleges in its private loan portfolio, yet had sent out only 4,233 discharge applications to borrowers. Of those, 1,801 borrowers submitted applications, and Navient “fully reviewed” 1,061 cases – approving only 238 and denying 823. In other words, roughly 77–80% of applicants were denied, and less than 1 in 10 potentially eligible borrowers even got the chance to apply. Lawmakers characterized this outcome as “disgraceful”, suggesting Navient is “improperly denying thousands of borrowers relief” that they are entitled to by law.

Denial Letters and Lack of Transparency

Borrowers who went through Navient’s process have described it as opaque and frustrating. Navient’s application form is 12 pages long and demands extensive documentation – asking borrowers to recall when they discovered the school’s wrongdoing and to produce decades-old evidence such as school catalogs, marketing materials, or court judgments against the school. The form even warns that incomplete information could be deemed perjury. Despite this burden on borrowers, Navient’s denial notices provide virtually no explanation. In many cases, borrowers received only a generic form letter stating that the request was denied after a “holistic” review, without identifying any specific criteria that caused the denial. If borrowers attempt to dispute or appeal the denial, Navient responds with boilerplate language that it cannot provide details because the review is “holistic”. According to a recent lawsuit, Navient “mass-denied applications with cursory and boilerplate language” and then refused to explain its decisions, calling its evaluation process “proprietary and confidential”. In short, borrowers are left in the dark about why their discharge was refused and have no clear guidance on how to fix or appeal it.

These revelations have prompted public officials to take action. In December 2024, Sen. Warren (joined by 24 other members of Congress) sent a letter to the Consumer Financial Protection Bureau (CFPB) and Federal Trade Commission (FTC) detailing Navient’s conduct and urging an investigation. “Navient’s cancellation process for borrowers who attended predatory, for-profit schools is flawed and opaque and potentially violates federal consumer protection law,” the lawmakers wrote. They noted that Navient had promised to cancel all private loans that meet the criteria of the FTC’s Holder Rule (see below), yet “the convoluted process the company has set up for defrauded borrowers is flawed” and “Navient denies relief to 80%” of applicants, often with improper or opaque reasoning. The letter called Navient’s behavior “disgraceful” and urged the CFPB and FTC to use their enforcement powers to ensure borrowers get the relief “they are entitled to under the Holder Rule”.

Regulatory findings echo these concerns. In a December 2024 report, the CFPB highlighted that some student loan servicers “misled borrowers about their right to challenge their loans” and failed to properly consider most borrower claims of school misconduct, effectively denying borrowers the protections that exist in law. This aligns with what borrowers and advocates have reported about Navient’s secretive program: despite having a contractual duty to consider school fraud claims, the company has been dodging that responsibility. As Eileen Connor, an attorney with the Project on Predatory Student Lending, summed up, “Student borrowers have legal rights to loan cancellation when there is evidence of fraud, and Navient has not been fulfilling its duty under the law.”.

Background

Predatory Private Loans from 2002–2014 and School Misconduct

The focus on loans from 2002 to 2014 is no accident. During this period, Sallie Mae (the predecessor of Navient) partnered with many for-profit colleges to issue private “subprime” student loans to high-risk borrowers. These loans often carried high interest rates and were “designed to fail,” with Sallie Mae fully aware that many students would be unable to repay them. Why would a lender knowingly make loans likely to default? Investigations and lawsuits have shown a quid pro quo arrangement: for-profit schools needed private loan funds to keep accessing federal aid, and Sallie Mae wanted a pipeline of federally-guaranteed loans. Under the federal 90/10 rule, for-profit colleges must get at least 10% of their revenue from non-federal sources – so these schools aggressively pushed private loans to cover that gap. Sallie Mae “collaborated with for-profit schools” to serve this need, treating the risky private loans as a “baited hook” to reel in more profitable federal loan business. In essence, the schools got the benefit of students’ tuition funded by private credit, and Sallie Mae/Navient profited on both ends (the private loans, which were often cosigned or otherwise insured by the schools, and the federally-backed loans the students also took).

Students were often misled or steered into these private loans when they actually qualified for safer federal loans

For example, a recent Illinois lawsuit describes how a financial aid counselor at the now-defunct International Academy of Design and Technology (IADT) urged the plaintiff to take out private Sallie Mae loans – with variable interest and fewer protections – even though she was eligible for federal Stafford loans. The counselor downplayed the risks, falsely assuring her “you’ll be making more than enough money once you graduate to pay this off.” In reality, the school’s credits were non-transferable and job prospects never materialized. This bait-and-switch was common at certain for-profit colleges: students were promised great outcomes, “enticed to enroll” by deceptive claims, and then saddled with high-cost private debt.

The fallout from these practices is enormous. Many of these private loans had astronomical default rates (in some cohorts, 50–90% of borrowers defaulted), reflecting how untenable they were for the students. Even when borrowers managed to avoid default by making payments, they often found their balances ballooning due to interest and fees. (Indeed, a cruel irony noted in one case: a borrower who diligently paid for years saw her balance grow from $61k to $86k, and was excluded from earlier relief programs precisely because she hadn’t defaulted.)

Previous settlements

In January 2022, a coalition of 39 state attorneys general reached a $1.85 billion settlement with Navient over these predatory lending practices. As part of that deal, Navient canceled about $1.7 billion in private loan balances for roughly 66,000 borrowers nationwide. However, the relief was targeted to a narrow group – primarily borrowers who had already defaulted on certain subprime private loans (many of which were disbursed between 2002 and 2014). Borrowers who kept struggling to pay (or who defaulted after the cutoff date) were not included. This means hundreds of thousands of borrowers from that era still carry these loans. Navient’s new “school misconduct” discharge program is ostensibly a way to help those left behind, but as detailed above, it has provided relief to only a tiny fraction so far.

Takeaway

If you have a private student loan from the early 2000s through mid-2010s that you believe was connected to school fraud (common examples include loans for Corinthian Colleges, ITT Technical Institute, Art Institutes, Career Education Corp schools like IADT, DeVry University, etc.), know that you are not alone. There is a history of systemic misconduct behind these loans, and both your school and the lender may have been complicit. This context strengthens the case that your debt is legally challengeable – even if Navient is currently stonewalling many borrowers.

Legal Grounds for Relief: Contract Defenses, Misrepresentation, and More

Borrowers with private loans tied to school misconduct have several legal grounds on which they can seek relief or cancellation of their debt. Key theories include:

Contract Law (FTC Holder Rule – Claims and Defenses Against the Lender):

• Most private education loans used at for-profit schools include a specific contract clause preserving the borrower’s right to assert “claims and defenses” against the loan holder that they could have raised against the school. This is mandated by the FTC’s Holder-in-Due-Course Rule, commonly known as the Holder Rule. In plain terms, if your school engaged in fraud or breach of contract, you can use that as a defense against repaying the loan – the lender stands in the shoes of the school. For example, if the school falsely promised you a certain job placement or credential and that induced you to enroll and take loans, that misrepresentation can be raised to void or cancel the debt owed to the lender. The Holder Rule doesn’t automatically cancel loans; rather, it prevents the lender from enforcing the loan when valid claims exist. In practice, this usually means a borrower could refuse to pay and, if sued for collection, counterclaim that the debt is unenforceable due to the school’s wrongdoing. Navient itself has acknowledged this risk in its investor reports, noting that if a partner school failed to deliver promised education, “the borrower could raise the same claims and defenses against us… [and] our ability to collect loan amounts could be materially impaired.”. 
  
  Bottom line: The loan contract may give you the right to cancellation as a matter of defense – a powerful legal tool.

Misrepresentation and Fraud (School Misconduct):

• Borrowers can also seek relief under state consumer protection laws or common-law fraud theories. If the school lied to you (about accreditation, job prospects, transfer credits, cost, etc.) or concealed important information, those are misrepresentations that likely violate state law. Normally, you would sue the school for fraud or misrepresentation – but if the school is bankrupt or closed, the Holder Rule allows you to instead claim that fraud as a reason you do not owe the lender. In some cases, borrowers (or state AGs on their behalf) have brought claims directly against lenders for aiding and abetting the fraud or engaging in an unfair or deceptive practice by financing a scheme. In fact, the 2022 state AG settlement characterized Navient’s conduct as “unfair and deceptive” in originating these loans. In the recent Illinois class-action suit, the borrower alleges Navient “fraudulently and unfairly” denied her discharge, effectively perpetuating the original school fraud by forcing her to pay for a worthless education. All of this is to say: misrepresentation by the school is a core legal ground for relief, either as a direct claim or as a defense to the loan. Gather any evidence of what your school told you versus what proved false – it can be critical.

Breach of Contract (and Breach of Good Faith):

• Some borrowers have argued that the loan contract is void or should be canceled because the fundamental purpose of the loan – to pay for a valid education – was never fulfilled due to the school’s breach of its promises. This is a less common angle, but, for instance, if your enrollment agreement with the school was rescinded or voided because of the school’s illegal conduct, you could argue the loan (which financed that agreement) should also be canceled as a correlated contract. Additionally, there’s an implied duty of good faith and fair dealing in contracts – one could contend Navient breached this duty by knowingly exploiting borrowers in a fraudulent scheme (though such arguments often fold into consumer protection claims). The strongest contract-based hook, however, remains the Holder Rule language mentioned above – which explicitly ties the loan’s enforceability to the school’s behavior.

Breach of Fiduciary Duty (School or Lender):

• Generally, schools and lenders are not considered fiduciaries of the student borrowers. A fiduciary duty arises from a special trust relationship (like attorney-client or trustee-beneficiary), and courts have repeatedly found that “loan servicers are not fiduciaries” of borrowers. For example, a federal judge in 2021 dismissed a fiduciary-duty claim against Navient, noting no such duty exists in ordinary lender-borrower dealings. So, while your school’s financial aid officer should have acted in your best interest, the law might not formally recognize them as a fiduciary. That said, you might see “breach of fiduciary duty” mentioned in some complaints, especially if there was an especially close advisory relationship. A more precise claim in these cases would often be negligent misrepresentation – i.e. the school’s counselor had a duty to give accurate information and not steer you wrong, and you relied on their false advice to your detriment. In summary, don’t pin your hopes on a fiduciary duty claim (it’s difficult to win), but do recognize that ethically the school betrayed your trust, which is addressed through the misrepresentation/fraud avenues above.

Unjust Enrichment or Restitution:

• As an alternative legal theory, borrowers might claim that it’s unjust for the lender to profit from a loan that was part of an illegal or fraudulent enterprise. If, for example, your loan payments ended up going straight to a school that was breaking the law, one could argue the lender and school were unjustly enriched. This is more of an equitable argument and typically would accompany the claims above in a lawsuit.

In practical terms, these legal grounds often get tested when a borrower stops paying and gets sued by the lender or debt collector. At that point, the borrower can raise the Holder Rule and school misconduct as an affirmative defense, potentially getting the debt declared void. However, waiting for a lawsuit is obviously risky and damaging (to credit, etc.). This is why advocates pushed Navient to create a proactive application process – so borrowers could assert these rights without having to default first. Unfortunately, as we’ve seen, Navient’s process has been adversarial and resistant to granting relief.

How This Differs from Federal Borrower Defense: It’s important to understand that the legal rights described above exist independently of the federal loan system’s Borrower Defense program. Borrower Defense to Repayment (BDR) is a U.S. Department of Education regulation that allows federal student loan borrowers to apply to have their loans forgiven if their school deceived them or broke certain laws. If a BDR claim is approved, the government cancels the federal loan and usually attempts to recoup the loss from the school. However, BDR applies only to federal loans – not private loans. So, if you were steered into a private loan instead of a federal loan, you effectively lost access to this federal safety net. There is no “official” borrower defense program for private loans managed by any government agency.

This means that for private loans, the onus is on the borrower to pursue relief through contracts and courts, rather than through an administrative claim. If you had taken a federal loan and your school lied to you, you could file a BDR application with the Department of Education and potentially receive a full discharge from the government (as many students from Corinthian, ITT Tech, etc. have). By contrast, with a private loan, you must appeal to the lender (as with Navient’s misconduct discharge form) or raise the issue in a legal forum. The protections differ as well: Federal loans have additional benefits like closed-school discharge (if your school shut down before you could finish, the federal loan can be forgiven) and public service forgiveness, etc. Private loans typically lack these guarantees. The Borrower Defense program has also evolved to allow group discharges – the Department of Ed can forgive whole groups of students’ loans if a pattern of fraud is proven, without each student needing to individually apply. No private lender offers an equivalent group relief mechanism; at best, they respond to class-action lawsuits or settlements after the fact.

In summary, borrowers with private loans have to rely on contract and state-law remedies, whereas federal loan borrowers can lean on specific Department of Ed programs. The substantive grounds (misrepresentation, etc.) are very similar – in fact, BDR claims themselves are typically based on a violation of state law by the school – but the process and enforcement are completely different. Navient’s so-called School Misconduct Discharge program is effectively a private, voluntary analog to Borrower Defense, but it operates with none of the transparency or borrower-friendly presumptions that the federal program aspires to. Navient is acting as both “judge and jury” on these private discharge claims, whereas with federal loans an impartial government process (imperfect though it may be) decides the outcome.

Options for Affected Borrowers: Taking Action and Seeking Relief

If you are a borrower stuck with a private student loan from a predatory school, there are several paths you can pursue now. These include legal action (individually or as a group), regulatory and oversight channels, and other strategies to protect your rights. We’ll outline each, along with recent developments that might support your efforts:

1. Apply (or Re-Apply) for Discharge Through Navient’s Program, if You Haven’t Already

Action:  If you haven’t yet submitted a School Misconduct Discharge Application to Navient, consider doing so – with tempered expectations. Navient’s application form can be obtained (PPSL has posted a blank copy on their website). The form will require you to detail the misconduct by your school and provide any supporting documentation. Be as thorough as possible: include specifics of what the school misrepresented to you, and attach copies of any evidence (emails, brochures, news of law enforcement actions against the school, etc.). If you know of government investigations or lawsuits against your school, mention them. Navient has asked for things like school catalogs and even court judgments, which many borrowers won’t have; still, provide what you can.

What to expect: Unfortunately, as detailed, the odds of approval are low – Navient has been denying ~80% of applications and often does not explain why. Some borrowers report being denied even when their school (e.g. Corinthian Colleges or ITT Tech) is a well-known case of fraud. Navient’s process has been inconsistent and opaque. If you do get denied, you can try to appeal or reapply if you have new evidence, but Navient’s own communications suggest the appeals process is limited and they often give the same boilerplate reply.

Why bother then? Two reasons: (1) Filing puts your situation on record. It creates documentation that you asserted your rights. If regulators later crack down on Navient or if a class action is certified, those records could help identify you as eligible for relief. (2) In the best case, you might be among the minority who do get their loans canceled. Navient claimed it has approved 238 borrowers as of last fall – some borrowers have indeed had their private loans forgiven through this program. It likely depends on the exact criteria Navient is using (which they haven’t fully disclosed). It could be that only the most clear-cut cases (e.g. certain loans from specific programs) are being approved. There’s a chance your case fits whatever mold they are reluctantly accepting.

Important: When filling out Navient’s form, stick to factual statements and avoid exaggeration. Any intentional falsification could cause trouble (the form is under penalty of perjury). If you’re unsure how to answer a question (for example, “when did you discover the misconduct” or describing the impact on your life), answer honestly in your own words – there’s no “wrong” answer about your personal experience, but they may be assessing credibility and thoroughness.

2. Document Everything and Seek Legal Advice

Given Navient’s track record, you should prepare for the possibility that you’ll need to fight through legal channels. Start by organizing your documents: loan promissory notes, any emails or letters from the school, promotional materials you received, your enrollment agreement, transcripts, etc. Also try to write down a timeline of events (when you enrolled, what you were told and by whom, when you first realized something was wrong, etc.). This will be incredibly useful if you later join a lawsuit or have to present your case to an attorney/general or judge.

Seek a consultation with a student loan lawyer or consumer protection attorney, especially one familiar with for-profit college cases. Nonprofit legal organizations like the Project on Predatory Student Lending (PPSL), legal aid societies, or state attorney general offices may be interested in your case if your school was notorious. PPSL, for example, has actively been litigating against Navient on behalf of borrowers from predatory schools. They and similar groups often collect borrower stories to identify patterns of misconduct.

If you can find other former students from your school who also have private loans, band together. Class action lawsuits can be a powerful tool when many borrowers share the same grievance. In February 2025, an Illinois borrower who attended IADT filed a class-action lawsuit against Navient for arbitrarily denying discharge applications despite clear evidence of school fraud. Her suit alleges that Navient’s blanket denials violate consumer protection laws and seeks relief for all Illinois borrowers who were similarly denied. This is a state-level class action – a model that could be replicated in other states or nationally (via a federal class action) depending on the circumstances. If such a lawsuit exists in your state or involving your school, you may be able to join as a class member or at least benefit if it succeeds.

Example: Amanda Luciano, the named plaintiff in the Illinois case, accrued loans for a “worthless degree” at IADT. After the big 2022 Navient settlement, her loans weren’t canceled because she hadn’t defaulted (she kept paying to protect her credit). Navient later sent her a misconduct discharge application, which she submitted with evidence of IADT’s “widespread fraud.” Yet she got a form denial with no explanation. According to her complaint, Navient denied her and others with only “boilerplate” reasons and refused to clarify, calling the process confidential. Her lawsuit seeks not only to force Navient to give a fair review or discharge to borrowers, but also to compensate borrowers for the harm caused by these unfair denials. This case is ongoing, but it highlights that legal action is underway and could pressure Navient to improve its practices or grant more discharges.

Tip: Even if you don’t currently have a lawyer, keep notes of every interaction with Navient (phone calls, etc.). If Navient representatives ever told you that you cannot discharge a private loan due to school fraud, or discouraged you from pursuing it, note that down – that could be evidence of misleading communication. (The CFPB has noted that servicers often “misled borrowers about their right to challenge their loans” in such cases.)

3. File Complaints with Government Agencies

Another avenue is to raise your voice with the regulators and watchdogs:

• Consumer Financial Protection Bureau (CFPB): The CFPB accepts consumer complaints about student loans. You can submit a complaint through their online database describing your situation – e.g. “I was misled by my school into a private loan, and Navient is improperly denying my discharge request”. Companies are required to respond to CFPB complaints, and the CFPB uses the data to spot patterns. In fact, the pressure on Navient to create the discharge program likely stemmed from regulatory attention. By filing a complaint, you ensure that CFPB officials are aware of your case and the broader issue. CFPB Director Rohit Chopra has shown interest in holding servicers accountable for deceptive practices, and a complaint can bolster the case that Navient’s behavior is unfair. (Note: As of 2025, CFPB has taken action to ban Navient from federal loan servicing for various abuses, and has spotlighted how private lenders handled these misconduct claims. Your complaints keep this issue on the radar.)
• Federal Trade Commission (FTC): The FTC, which oversees the Holder Rule, can act against companies that violate consumer protection rules. If you believe Navient is effectively flouting the Holder Rule (by refusing valid claims), you could submit a complaint to the FTC. The FTC might not resolve an individual’s loan issue, but if they see widespread violations, they can sue or fine a company. (For example, the FTC has previously worked with the Dept. of Education to secure discharges for defrauded students of certain schools.) In their Dec 2024 letter, lawmakers specifically asked the FTC to investigate Navient’s practices here.
• State Attorney General or Consumer Protection Office: Almost every state has an AG or consumer bureau that handles fraud complaints. Many AGs have been active in the for-profit college arena. Submit a complaint to your state AG detailing the school’s misconduct and your trouble obtaining relief. If your state was part of the 2022 Navient settlement, mention that your loans were not covered by that deal and you’re seeking alternate relief. State authorities can sometimes mediate with a company on your behalf, and if they see a pattern (e.g. many complaints from students of the same school), they might open an investigation or sue. For instance, it was the state AG lawsuits that forced Navient to cancel $1.7 billion of debt in 2022. Some states (like Illinois, Washington, Pennsylvania, etc.) have units focused on student loan issues.
• Department of Education (DOE): While the DOE doesn’t regulate private loans, if you also have federal loans or just as a concerned citizen, you can write to the DOE’s borrower defense unit or the Special Master for borrower defense (if one exists) to share your story. This can help inform federal policy, even if DOE can’t cancel a private loan. (On a policy level, DOE officials are aware that students like you were siphoned into private debt – it undercuts the effectiveness of federal student aid programs.)

When filing complaints, be concise and factual. State what the school did (e.g. false claims, high-pressure sales tactics), that you have a private loan from Navient as a result, and that Navient is refusing to honor your right to discharge despite evidence. Emphasize if you have supporting documentation or if the school’s misconduct has been publicly documented (for example, “my school was later investigated by the state for fraud” or “ED approved borrower defense discharges for students of my school, but I’m stuck with a private loan”).

4. Consider Stopping Payment – But Understand the Risks

Important: This is not a recommendation, but rather a discussion of a difficult option. Stopping payment on a private loan (i.e. going into default) is risky: it will harm your credit, the lender may send the loan to collections or sue you, and if you have a cosigner, they’ll pursue them too. However, some borrowers in extreme circumstances do choose to strategically default as a last resort, especially if they are judgment-proof (no income or assets to garnish) or the debt is truly unpayable. The sad reality is that the 2022 Navient settlement only helped those who were severely delinquent/defaulted – effectively rewarding non-payment. Borrowers who made good-faith payments got left with the bill. This creates a moral hazard where defaulting can seem like the only way to eventually get relief.

If you do find yourself unable to continue payments, know your rights in default. You will have the opportunity to raise defenses if the lender or a collector sues you. This is where the Holder Rule defense comes in most directly: in court, you can assert that the debt is not collectible because of the school’s fraud. You might need a lawyer’s help to do this effectively. Courts have in some instances sided with borrowers who proved school fraud, canceling the debt. The downside is you’d have to endure collections and legal proceedings to get there.

A potential middle ground is attempting to negotiate with Navient (or whatever entity holds the loan) for a settlement. If you have evidence of wrongdoing, you might say, “I intend to contest this debt due to the school’s fraud and have alerted regulators – would you agree to discharge or settle for a lesser amount to avoid further action?” This approach can be hit-or-miss; some borrowers have had loans quietly forgiven after raising hell, while others get nowhere. Navient did reserve $35 million in late 2023 for potential discharges due to “borrower claims”, indicating they expect to forgive at least some loans. It’s not a lot of money relative to all loans, but it’s something.

Caution: If your loan is still within the statute of limitations for collection and you have means they can go after, default is generally a last resort. Always consider consulting an attorney before deliberately withholding payment.

5. Bankruptcy Discharge (in Limited Cases)

Many people believe student loans cannot be discharged in bankruptcy, but that’s an oversimplification. Federal student loans and most private student loans are indeed hard to discharge because of a law that requires proving “undue hardship” (a tough standard) in court. However, some private loans are not covered by that strict standard. For a private loan to be protected from discharge, it generally must be a “qualified education loan” – which means it was used at an eligible institution and for qualified expenses (tuition, etc.). If your school was unaccredited or your loan exceeded the cost of attendance or was for something like bar exam prep, that loan might not meet the definition of an education loan in bankruptcy law. In those cases, the loan could be treated like regular unsecured debt and discharged through bankruptcy without the undue hardship test.

Even if your loan is a typical private student loan from an eligible school, bankruptcy is still an avenue if you can meet the hardship test (the Brunner test in most jurisdictions, which requires showing persistent financial difficulty, good-faith effort, and a hopeless outlook for repayment). There have been instances of courts discharging private student loans for borrowers from predatory schools, especially when the education provided no value and the debt is crippling. Some judges are becoming more sympathetic in egregious cases of for-profit fraud.

Recent developments: There is growing bipartisan support to make student loan discharge in bankruptcy easier. Legislation has been proposed (e.g. the Fresh Start Through Bankruptcy Act) that would explicitly restore the ability to discharge student loans (including private loans) after a certain number of years or without the harsh tests. As of 2025, no such bill is law yet, but keep an eye on Congress. If the law changes, bankruptcy could become a more viable tool for relief.

Note: Bankruptcy is a serious step with broad implications on your finances, so consult a bankruptcy attorney to evaluate your specific situation. But if you’re truly unable to pay and other relief hasn’t materialized, it’s worth exploring – especially if you suspect your loan might not be the kind Congress intended to shield (given it was part of a fraudulent scheme).

6. Stay Informed and Engage in Advocacy

Beyond your individual case, it can be empowering and useful to connect with the larger movement of borrowers and advocates dealing with these issues. Organizations like the Project on Predatory Student Lending, the Student Borrower Protection Center, and various borrower advocacy groups regularly publish updates, host webinars, or provide resources. For example, PPSL has a resource hub for Private Student Loans and has been pushing for systematic solutions. They even helped prompt the awareness campaign about Navient’s secret discharge program by publicizing the application form and alerting media.

Why engage? Sometimes, collective pressure leads to change. The more stories and complaints that come out, the more likely regulators or legislators will step in. Media coverage (such as the New York Times piece that broke the news on Navient’s program in May 2024) can spur action. Consider sharing your story (carefully, without exposing personal data) with reporters or through platforms like the CFPB’s “Tell Your Story”. Lawmakers (like Sen. Warren or your own representatives) often invite constituents to share if they’ve been harmed by student loan practices – adding your voice can prompt letters, hearings, or inquiries that benefit everyone in your situation.

Pending Reforms and What to Watch For

The landscape for borrower protections is evolving. Here are some key things to watch in the near future, which could affect your options:

CFPB/FTC Enforcement Actions:

• Following the December 2024 Warren letter, there is pressure on the CFPB and FTC to take enforcement action against Navient. This could result in a consent order or lawsuit requiring Navient to fix its discharge process or grant more relief. For instance, the agencies might find that Navient’s 80% denial rate – and its failure to give reasons – constitutes an “unfair or abusive” practice under consumer law. If the CFPB or FTC sues Navient in 2025 and wins, we could see broader discharges or a streamlined process imposed. Keep an eye out for news on CFPB investigations or any announcements from the FTC regarding the Holder Rule enforcement. (As a parallel, note that the CFPB has already punished Navient for other misdeeds – e.g. in September 2024 it banned Navient from federal loan servicing and fined it, citing years of abuses. A similar crackdown could happen on the private loan front.)

Transfer of Navient Loans to MOHELA:

• Navient has announced plans to transfer the servicing of its remaining student loans to MOHELA (Missouri Higher Education Loan Authority), a different servicer. This is supposed to occur over 2024–2025. If you get a notice that your loan is now being serviced by MOHELA, don’t assume your discharge fight is over. Navient has stated it will retain the obligation to cancel loans that meet the Holder Rule criteria. In practice, this means you might apply through Navient now, but by the time any decision is made, MOHELA could be handling your account. Watch for communications on how Holder Rule claims will be handled during and after the transfer. Lawmakers have asked Navient for clarity on this point. It’s possible that if MOHELA takes over, the process could become even more confusing (since MOHELA wasn’t part of the original lending scheme). So, stay vigilant: if you haven’t applied yet, you may want to do so before the transfer, or confirm with the new servicer how to submit a misconduct discharge claim. Also, save copies of all your documents and Navient correspondence before any hand-off.

Legislation or Broader Relief Programs:

• Thus far, Congress has not passed a law granting relief to private loan borrowers from predatory schools. However, the issue is gaining visibility. Some members of Congress have floated ideas like expanding Borrower Defense (which currently only covers federal loans) or creating a loan relief fund for private loan borrowers harmed by school fraud. Any such legislation would face hurdles, but bipartisan sympathy exists for students deceived by schools (witness the near-unanimous support for veterans defrauded by Corinthian, etc.). Keep an ear out for bills or amendments – for example, proposals to restore bankruptcy options (as mentioned), or to require private lenders to forgive loans if the borrower could have gotten a discharge on a similar federal loan. Even if not immediate, these ideas could become part of a Higher Education Act reauthorization or other must-pass bills.

State-Level Protections:

• On the state side, a number of states have enacted “Student Loan Borrower Bills of Rights” which regulate loan servicers operating in the state. These laws (in states like California, Illinois, New York, etc.) mandate that servicers provide accurate information and fair treatment. If Navient (or future servicers like MOHELA) continues to mislead borrowers about their rights or fails to respond properly to misconduct claims, they could run afoul of state servicing laws. We might see state regulators or AGs step in using those laws. Additionally, states might pursue new settlements or enforcement if Navient’s promises (from the 2022 settlement) aren’t being fulfilled. For example, if evidence shows Navient isn’t truly canceling all loans meeting the agreed criteria, AGs could act. Watch for news from your state’s Attorney General – some, like Massachusetts and Pennsylvania, have been very proactive on student loan issues. They might issue advisories or sue servicers who don’t honor the Holder Rule.

Court Decisions in Pending Lawsuits:

• The private lawsuits in motion (such as Luciano v. Navient in Illinois, and possibly others that will be filed) could lead to significant developments. If a court certifies a class action and finds Navient’s blanket denials unlawful, that could force Navient to reopen or approve many applications. A favorable judgment might even declare that certain loans are invalid due to school fraud, automatically freeing borrowers in that class. These cases take time, but outcomes in 2025 or 2026 could set precedents. Keep track of cases involving your school or loans – a win in one jurisdiction could influence Navient’s approach nationwide (they might settle and agree to broader discharges to avoid multiple losses).

Changes in the Borrower Defense (Federal) Program:

• Indirectly, watch what happens with Borrower Defense to Repayment rules for federal loans. The Biden Administration issued new, more borrower-friendly regulations for BDR in 2023, but they’ve been tied up by a court challenge (a Fifth Circuit ruling paused them). Eventually, either those rules will go into effect or a revised version will. Why does this matter for private loans? It further cements the principle that students shouldn’t have to repay loans for a fraudulent education. Strong federal policy, even if technically not applying to private loans, adds moral and political weight to arguments that all students deserve relief in such scenarios. It could also trigger additional scrutiny: for instance, if DOE grants a group discharge to all federal loan borrowers from School X, that highlights that private loan borrowers from School X are stuck in an inequitable position. That contrast can spur media or officials to push for a fix. We’ve seen hints of this: e.g., when DOE canceled federal loans for Corinthian Colleges students, Navient faced pressure to forgive Corinthian-related private loans (which it eventually did for some, via the AG settlement).

Supreme Court/CFPB Developments:

• A final note – the CFPB’s authority is being reviewed by the Supreme Court (regarding its funding structure). A adverse decision could temporarily hamper CFPB’s powers. If that happens, enforcement might slow until Congress or other solutions step in. Conversely, if CFPB remains intact, expect Director Chopra to keep a close eye on cases like Navient’s. In any scenario, the momentum is on the side of exposing and rectifying these predatory loan issues, given the attention from multiple fronts.

Guidance for Borrowers Seeking Help

To distill all of this into actionable steps, here’s what you (as a borrower dealing with this) can do right now and in the near term:

Gather Evidence:

• Compile all documents related to your loan and your school. This includes your loan contract (check for the Holder Rule clause – often a sentence about claims and defenses), any communications from Navient about the misconduct discharge program, and evidence of your school’s wrongdoing (e.g. state or federal findings against the school, lawsuits, news articles, promotional materials that contain lies, etc.). This dossier will be your ammo whether you apply through Navient, file a complaint, or go to court.

Submit Navient’s Discharge Application:

• If you haven’t already, consider filling out the School Misconduct Discharge form so that your request is on record. Be truthful and detailed. While denial is likely, you preserve your rights by formally requesting cancellation. If you’re denied, save the denial letter.

Don’t Give Up After a Denial:

• A Navient denial is not the final word. Many borrowers are getting denied automatically; it doesn’t mean your claim isn’t valid. After denial, escalate: file CFPB and state complaints as described, and mention in those that you applied and were unfairly denied with no explanation. This adds weight to regulatory inquiries (showing that the internal process failed you).

Consult Legal Help and Join Forces:

• Reach out to organizations or attorneys who specialize in student loan or consumer cases. The National Consumer Law Center website can help locate consumer attorneys. Nonprofits like Legal Aid or clinics in your state might already be looking into these Navient issues. If a class action is underway that you might be part of (e.g. all borrowers in your state from XYZ school), get in touch with the lawyers handling it – they often want to hear from more affected people. Support networks (even online forums or Reddit communities for student loan borrowers) can provide tips and the latest news – just be cautious to avoid scams (never pay upfront for “debt relief” services claiming they’ll magically settle your loan).

Protect Yourself Financially:

• Until your loan is actually discharged, it’s legally enforceable. So continue making payments if you can, or explore deferment/hardship options, unless you have a strategic reason to cease paying. If you’re struggling, communicate with the servicer in writing (email or certified mail) about your situation – this creates a paper trail. Watch out for default consequences if you stop paying: collection fees, possible litigation, etc. If you do default, be prepared to assert your defenses vigorously.

Monitor Your Credit and Loan Status:

• Keep an eye on your credit reports. If Navient/MOHELA transfers the loan or changes its status (for example, if they unexpectedly write it off or cancel it, which could happen for some borrowers if they quietly expand relief), you’ll see a update. Also, sometimes discharged loans might be reported as “charged off” or “settled” – if you get any notice of such, follow up to confirm if it means you no longer owe it. There have been instances after the 2022 settlement where borrowers discovered via credit report that their loan was gone before they even got an official letter.

Stay Updated on Reforms:

• Follow news from reliable sources (major newspapers, official press releases, advocacy group reports) about student loan policy changes. If a new path opens – e.g., a renewed settlement, a government initiative, or a legal victory – act on it. For example, if bankruptcy laws change and suddenly allow easier discharge of private loans, that might be a game-changer for you to consult a lawyer about filing. Or if the CFPB announces a settlement with Navient that sets up a restitution process, you’ll want to promptly file a claim in that.

Beware of Scams:

• Unfortunately, where there are desperate borrowers, there are scammers. No legitimate entity will ask you to pay upfront for loan forgiveness or inclusion in a lawsuit. Be wary of any “debt relief” companies that promise to get your private loan wiped out for a fee – many are scams or doing nothing you can’t do yourself. Stick to official channels and nonprofit or legal aid advisors when seeking help.

In closing, know that you do have rights and potential avenues for relief – even if Navient’s current stance is hostile. The legal system and regulators are slowly catching up to this problem. As frustrating as it is, persistence can pay off. We’ve seen waves of relief for federal loan borrowers from predatory schools; now the focus is turning to private loan borrowers like you who were unfairly burdened. By staying informed and assertive, you increase your chances of being in the next wave of relief – whether through a successful application, a court judgment, or a policy change.