For years, Michael Shahbazi’s phone has often rung numerous times a day with calls from the nation’s largest educational loan servicing company, Navient, pressing him for payments on his student loan. In 2011, Mr. Shahbazi filed for bankruptcy, and yet still the calls continued. Navient has also called his family members, including his mother-in-law and brother, and his wife’s employer.

But on April 25, those calls will cease—not only for Mr. Shahbazi, but for about 16,000 other student loan borrowers like him who’ve declared bankruptcy, and whom Navient has pursued with similarly aggressive tactics.

Navient made the change in response to a motion for preliminary injunction and limited class certification in a lawsuit filed by Mr. Shahbazi and Evan Brian Crocker, another student borrower, in US Bankruptcy Court in the Southern District of Texas. The case is  Evan Brian Crocker et al. v. Navient Solutions, LLC and Navient Credit Finance Corporation.

Representing Mr. Shahbazi and Mr. Crocker in the case are the New Orleans-based law firms of Jones Swanson and Fishman Haygood, as well as Chicago-based Joshua Kons, and Houston-based firms Tran Singh and Ross, Banks, May, Cron and Cavin. On May 11, 2017, the firms were appointed interim class counsel and interim lead counsel for absent class members. The New York-based firm Boies Schiller Flexner is also co-counsel on behalf of the proposed class in the case.

Under the terms of the voluntary agreement that Navient filed with the court, the company will no longer phone or otherwise contact borrowers with certain student loans who filed for bankruptcy after October 2005. As a result, Jones Swanson and co-counsel estimate that about 16,000 student debtors have stopped receiving what many describe as constant, harassing phone calls from Navient. Instead, Navient will simply send them monthly statements.

Navient’s agreement is just the latest step in a long, contentious history of student loans and the rules concerning their repayment.

In the 1970s, Congress changed the bankruptcy code so that it became nearly impossible for borrowers to discharge most types of student loans, even as part of a bankruptcy proceeding.

Since the 1970s, however, private financial institutions have broadened the definition of what they offer as “educational” loans, including those intended to pay for unaccredited programs like career training and bar-exam study.

Now Mr. Shahbazi’s and Mr. Crocker’s case against Navient could test this argument for the first time as a class action.

Case Update

On October 21, 2019, the Fifth Circuit Court of Appeals issued an opinion on both the merits and the scope of this lawsuit. On the merits, the Fifth Circuit held that the loans at issue in this lawsuit – private non-qualified education loans – are dischargeable in bankruptcy. This ruling supports Navient’s agreement to suspend collection communications to debtors who have received a discharge in bankruptcy. Given this ruling on the merits, we believe even more strongly that private non-qualified education loans are dischargeable in bankruptcy throughout the nation, and we feel strongly that Navient should not be collecting payments on these loans or otherwise harassing debtors after they have received a bankruptcy discharge. With regard to the scope of the lawsuit, the Fifth Circuit held that our lawsuit only covers individuals who live within the Southern District of Texas – Houston and the surrounding areas. We moved for reconsideration of the Fifth Circuit’s decision about the scope of the lawsuit, and just last week we were notified that the full Fifth Circuit did not alter its decision in any way. We continue to study the law to determine how we can obtain effective relief for student loan debtors with private non-qualified education loans outside of the Southern District of Texas.

Note: An earlier version of this lawsuit was filed under the name Evan Brian Haas, Michael Shahbazi, et al. v. Navient Solutions, LLC and Navient Credit Finance Corporation.