Sallie Mae has long drawn the ire of student loan borrowers struggling to pay back their debt. 
 
 But as it turns out, they might have had a real reason to complain. 
 
 On Wednesday, the federal government and the Washington state Attorney General sued Navient, formerly part of Sallie Mae, for allegedly cheating borrowers out of their repayment rights. Another lawsuit filed by the Illinois Attorneys General named both Navient and Sallie Mae. 
 
 The two companies handle student loan payments from millions of borrowers. 
 
 "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs," said Richard Cordray, the director of the Consumer Financial Protection Bureau, which brought the federal suit. 
 
 Navient, which spun off from Sallie Mae in 2014, is currently the biggest student loan servicer in the country, handling more than 12 million accounts. About half of those borrowers have federal loans and the other half are private. 
 
 About one in four student loan borrowers have Navient as their loan servicer, according to the CFPB. That means Navient is where they're sending their monthly checks to pay off their loans. 
 
 The CFPB's allegations go back as far as 2010. It claims that Navient steered struggling borrowers toward paying more than they had to, and misallocated borrowers' payments when made across multiple loans, for example. It also alleges that in some cases, Navient erroneously reported borrowers had defaulted on their loans, damaging their credit score. 
 
 Related: Students are graduating with $30,000 in debt 
 
 In a statement, Navient said these allegations are unfounded and that "the timing of this lawsuit -- midnight action filed on the eve of a new administration -- reflects their political motivations." 
 
 "The suit improperly seeks to impose penalties on Navient based on new servicing standards applied retroactively and applied only against one servicer," the company said. 
 
 Navient is one of nine companies that are contracted by the government to service federal student loans. 
 
 The government also claims Navient (NAVI) made it harder for borrowers to enroll in an income-driven repayment plan, which can be used to lower their monthly payment if they're struggling to pay. The suit says that Navient instead encouraged borrowers to enter forbearance (temporarily stopping payments altogether) because it required less paperwork and fewer staff resources. Meanwhile, these borrowers racked up additional unpaid interest. 
 
 But Navient says that this assertion ignores the fact that almost half of the federal loans it services are enrolled in income-driven plans. 
 
 Related: Don't be fooled by student debt relief scams 
 
 The Attorneys General suits not only allege problems with the loan servicing, but also with loan origination, claiming that problems started as early as 2000. 
 
 Sallie Mae put student borrowers into "expensive subprime loans that it knew were going to fail," said Illinois AG Lisa Madigan. 
 
 She said her office reviewed thousands of consumer complaints and hundreds of phone calls. 
 
 The state lawsuits are seeking debt relief for those borrowers who took out these "subprime" loans. The states, and the CFPB, are also seeking money for borrowers who may have been hurt by the companies' servicing practices, as well as civil penalties. 
 
 Anyone who borrowed a private loan from Sallie Mae prior to 2010 or currently has their loan serviced by Navient could be impacted, said Washington AG Bob Ferguson. 
 
 Sallie Mae (SLM), which was named only in the Illinois suit, said on Wednesday that Navient would accept responsibility for all costs arising from this matter as per an earlier agreement. The two have operated as independent companies since 2014. 
 
 Correction: A previous version of this story incorrectly stated that Sallie Mae was also named in the Washington AG's lawsuit. ||||| Federal regulators have sued Navient, accusing the biggest U.S. student loan company of making it harder for borrowers to repay loans by giving them bad information, processing payments incorrectly and failing to act on complaints. 
 
 The Consumer Financial Protection Bureau filed the federal lawsuit against Navient Corp. and two subsidiaries on Wednesday, seeking restitution for affected borrowers and money penalties. 
 
 The agency said the company also cheated struggling borrowers out of their rights to lower their payments "through shortcuts and deception." 
 
 The company's illegal practices made it harder and more costly for some borrowers to repay their student loans, the agency said. 
 
 "For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans," Cordray said in a statement. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs." 
 
 Among the allegations: that Navient failed to correctly apply borrowers' payments to their accounts; steered struggling borrowers into paying more than they had to; and hurt the credit of disabled borrowers, including injured veterans, by misreporting to the credit-reporting agencies the status of their loans. 
 
 In May 2015, the Justice Department announced that nearly 78,000 members of the U.S. military would be reimbursed under a $60 million consent decree with Navient, because they had been charged excess interest on student loans. 
 
 The CFPB said that since July 2011, when it began operations, tens of thousands of borrowers have filed complaints with Navient, the agency and other government agencies about the obstacles they faced in repaying federal and private student loans serviced by Navient. 
 
 Navient disputed the allegations, calling the suit a politically motivated "midnight action" two days before the Trump administration takes office. 
 
 "We will vigorously defend against these false allegations," the company said in a statement. 
 
 Navient, formerly part of Sallie Mae, manages and collects payments on more than $300 billion in federal and private-market student loans, according to the CFPB. The company services loans held by more than 12 million borrowers, including over 6 million loan accounts under its contract with the Education Department. 
 
 The New York Times pointed out that Navient does not make the loans. 
 
 Republicans have opposed the CFPB, which was created by the financial overhaul law enacted following the 2008 crisis. Some Republican lawmakers want President-elect Donald Trump to fire the agency's director, Richard Cordray, after he assumes office. 
 
 The consumer watchdog agency has been enmeshed in partisan politics since its creation in 2010. And in October, a federal appeals court ruled that its structure is unconstitutional because it gives too much power to a single agency director. 
 
 The court ruled that the way the CFPB is organized violates the Constitution's separation of powers by limiting the president's ability to remove the director. 
 
 Washington state and Illinois filed their own suits against Navient on Wednesday, lodging accusations of unfair and deceptive practices. The company also disputed the state actions. 
 
 Student loan debt became a leading issue in the presidential election campaign. Regulators across the government have been scrutinizing Navient and other major companies in the $1.2 trillion student debt market, such as Great Lakes, PHEAA and Nelnet. 
 
 Navient, based in Wilmington, Delaware, said the CFPB's suit "improperly seeks to impose penalties on Navient based on new (loan) servicing standards applied retroactively and applied only against one servicer." 
 
 Navient said the standards being applied by the CFPB don't track with the Education Department's regulations and that they will harm student loan borrowers and increase defaults. 
 
 The Associated Press contributed to this report ||||| WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is suing the nation’s largest servicer of both federal and private student loans for systematically and illegally failing borrowers at every stage of repayment. For years, Navient, formerly part of Sallie Mae, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans. The Bureau seeks to recover significant relief for the borrowers harmed by these illegal servicing failures. 
 
 "For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans," said CFPB Director Richard Cordray. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today's action seeks to hold them accountable." 
 
 Formerly part of Sallie Mae, Inc., Navient is the largest student loan servicer in the United States. It services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Altogether, it services more than $300 billion in federal and private student loans. Named in today’s lawsuit are Navient Corporation and two of its subsidiaries: Navient Solutions is a division responsible for loan servicing operations; Pioneer Credit Recovery specializes in the collection of defaulted student loans. 
 
 Servicers are a critical link between borrowers and lenders. They manage borrowers’ accounts, process monthly payments, and communicate directly with borrowers. When facing unemployment or other financial hardship, borrowers rely on their student loan servicer to help them enroll in alternative repayment plans or request a modification of loan terms. A servicer is often different from the lender, and borrowers typically have no control over which company is assigned to service their loans. 
 
 Starting in 2009, the vast majority of federal student loan borrowers gained a right to make payments based on how much money they earn by enrolling in repayment arrangements known as income-driven repayment plans. These plans are part of the federal government’s effort to make student loans more affordable. For borrowers who meet certain income and family-size criteria, these plans can offer monthly payments as low as zero dollars. Another important benefit of income-driven repayment plans is that for the first three years after enrollment, many consumers are entitled to have the federal government pay part of the interest charges if they can’t keep up. All federal student loan borrowers enrolled in these plans may be eligible for loan forgiveness after 20 or 25 years of monthly payments. 
 
 In today’s action, the Bureau alleges that Navient has failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems. Critically, it systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers. Specifically, among the allegations in today’s lawsuit, the Bureau charges that Navient: 
 
 Fails to correctly apply or allocate borrower payments to their accounts: As soon as a borrower begins to pay back their loans, student loan servicers are supposed to take a borrower’s payment and follow instructions from the borrower about how to apply it across their multiple loans. Navient repeatedly misapplies or misallocates payments — often making the same error multiple times over many months. The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company. 
 
 
 
 As soon as a borrower begins to pay back their loans, student loan servicers are supposed to take a borrower’s payment and follow instructions from the borrower about how to apply it across their multiple loans. Navient repeatedly misapplies or misallocates payments — often making the same error multiple times over many months. The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company. Steers struggling borrowers toward paying more than they have to on loans: When borrowers run into trouble repaying their federal student loans, they have a right under federal law to apply for repayment plans that allow for a lower monthly payment. But the Bureau believes that Navient steers many borrowers into forbearance, an option designed to let borrowers take a short break from making payments. But interest continues to add up during forbearance. Certain consumers with subsidized loans end up paying a heavy price because they could have potentially avoided those interest charges. From January 2010 to March 2015, the company added up to $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances. The Bureau believes that a large portion of these charges could have been avoided had Navient followed the law. 
 
 
 
 When borrowers run into trouble repaying their federal student loans, they have a right under federal law to apply for repayment plans that allow for a lower monthly payment. But the Bureau believes that Navient steers many borrowers into forbearance, an option designed to let borrowers take a short break from making payments. But interest continues to add up during forbearance. Certain consumers with subsidized loans end up paying a heavy price because they could have potentially avoided those interest charges. From January 2010 to March 2015, the company added up to $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances. The Bureau believes that a large portion of these charges could have been avoided had Navient followed the law. Obscured information consumers needed to maintain their lower payments: Borrowers who successfully enroll in an income-driven repayment plan need to recertify their income and family size annually. But Navient’s emails and annual renewal notice sent to borrowers failed to adequately inform them of critical deadlines or the consequences if they failed to act. Navient also obscured its renewal notices in emails sent to borrowers that did not adequately alert them about the need to renew. Many borrowers did not renew their enrollment on time and they lost their affordable monthly payments, which could have caused their monthly payments to jump by hundreds or even thousands of dollars. When that happens, accrued interest is added to the borrower’s principal balance, and these borrowers may have lost other protections, including interest subsidies and progress toward loan forgiveness. 
 
 
 
 Borrowers who successfully enroll in an income-driven repayment plan need to recertify their income and family size annually. But Navient’s emails and annual renewal notice sent to borrowers failed to adequately inform them of critical deadlines or the consequences if they failed to act. Navient also obscured its renewal notices in emails sent to borrowers that did not adequately alert them about the need to renew. Many borrowers did not renew their enrollment on time and they lost their affordable monthly payments, which could have caused their monthly payments to jump by hundreds or even thousands of dollars. When that happens, accrued interest is added to the borrower’s principal balance, and these borrowers may have lost other protections, including interest subsidies and progress toward loan forgiveness. Deceived private student loan borrowers about requirements to release their co-signer from the loan: Navient told borrowers that they could apply for co-signer release if they made a certain number of consecutive, on-time payments. Even though it permits borrowers to prepay monthly installments in advance and tells customers who do prepay that they can skip upcoming payments, when borrowers did so, Navient reset the counter on the number of consecutive payments they made to zero. So borrowers who tried to get ahead of their loans and prepay would have been denied co-signer release and had to start over. 
 
 
 
 Navient told borrowers that they could apply for co-signer release if they made a certain number of consecutive, on-time payments. Even though it permits borrowers to prepay monthly installments in advance and tells customers who do prepay that they can skip upcoming payments, when borrowers did so, Navient reset the counter on the number of consecutive payments they made to zero. So borrowers who tried to get ahead of their loans and prepay would have been denied co-signer release and had to start over. Harmed the credit of disabled borrowers, including severely injured veterans: Student loan payments are reported to credit reporting companies. Severely and permanently disabled borrowers with federal student loans, including veterans whose disability is connected to their military service, have a right to seek loan forgiveness under the federal Total and Permanent Disability discharge program. Navient misreported to the credit reporting companies that borrowers who had their loans discharged under this program had defaulted on their loans when they had not. This potentially caused damage to their credit reports. 
 
 
 
 The Bureau also alleges that Navient, through its subsidiary Pioneer, made illegal misrepresentations relating to the federal loan rehabilitation program available to defaulted borrowers. Pioneer misrepresented the effect of completing the federal loan rehabilitation program by falsely stating or implying that doing so would remove all adverse information about the defaulted loan from the borrower’s credit report. Pioneer also misrepresented the collection fees that would be forgiven upon completion of the program. 
 
 Today’s lawsuit alleges that Navient has been in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act. The suit seeks redress for consumers harmed by Navient’s illegal practices. The CFPB is also seeking to keep Navient from continuing the illegal conduct described in the complaint, and to prevent new borrowers from being harmed. 
 
 The complaint against Navient Corporation, Navient Solutions, and Pioneer Credit Recovery is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_Navient-Pioneer-Credit-Recovery-complaint.pdf 
 
 This action comes as the Bureau takes steps to ensure that all student loan borrowers have access to adequate student loan servicing. In 2015, the Bureau released a report outlining widespread servicing failures reported by both federal and private student loan borrowers and also published a framework for student loan servicing reforms. As part of this work, the Bureau has continually raised concerns around illegal student loan servicing practices. The Bureau has called for market-wide reforms and prioritized taking action against companies that engage in illegal servicing practices. 
 
 Student loans make up the nation’s second largest consumer debt market. Today there are more than 44 million federal and private student loan borrowers and collectively these consumers owe roughly $1.4 trillion. In a study last year, the CFPB found that more than 8 million borrowers are in default on more than $130 billion in student loans, a problem that may be driven by breakdowns in student loan servicing. Students and their families can find help on how to tackle their student debt on the CFPB’s website. Student loan borrowers experiencing problems related to repaying student loans or debt collection can also submit a complaint to the CFPB. 
 
 More information is available at consumerfinance.gov/students. 
 
 The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law. 
 
 
 
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 The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
– Nearly 25% of those who've borrowed money for school deal with Navient, the nation's largest servicer of both private and federal loans, and now two lawsuits against the company claim those 12 million or so borrowers have been cheated, the New York Times reports. Damages sought by the suits—filed separately by the Consumer Financial Protection Bureau and the state attorneys general of Illinois and Washington, who also sued Sallie Mae, per CNNMoney—could amount to billions of dollars and affect every customer, says Illinois AG Lisa Madigan. Allegations against the company, which doesn't actually make the loans but collects the payments on them for various banks and other lenders, include mismanaged loan payments, a lack of full transparency in loan documents, and other errors and mishandlings that may have illegally increased loan repayments. The CFPB says the company, which used to be part of Sallie Mae until 2014, "chose to shortcut and deceive consumers" to save money, including by purposely driving consumers away from income-based repayment plans that would be better for them but not as profitable for Navient. Another group the CFPB says Navient took advantage of: injured military veterans, whose credit reports were said to be damaged by misreported defaults. The bureau says tens of thousands of consumers have filed complaints against Navient since the CFPB began in 2011, per Fox News. Navient is crying partisan foul, claiming the move is a "midnight action filed on the eve of a new administration." Republicans have long gone after the CFPB, as well as the bank-regulating Dodd-Frank Act that created it. Navient defends itself in a statement on StreetInsider.com. (How unpaid student debt affects seniors.)