(CBS NEWS) Student debt has ballooned to $1.3 trillion, weighing on the financial future of 44 million borrowers. On top of their struggle to repay, many may have been “systematically and illegally” failed by the nation’s largest loan servicer, Navient, alleges the Consumer Finance Protection Bureau. 

A lawsuit against Navient claims the federal and private student loan servicer “created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained,” the CFPB said. The agency also alleges Navient “used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments.”

The charges raise questions about the role of student loan servicing companies at a time when college-related debt has become the second-largest consumer debt market after the mortgage industry. Navient, formerly part of Sallie Mae, services more than $300 billion in federal and private student loans, or roughly one out of four borrowers.

Among the charges, the CFPB lawsuit alleges that Navient guided struggling borrowers into forbearance, or a temporary break from repayment, rather than more favorable income-based repayment plans. 

With forbearance, “their debt continues to grow as the unpaid interest is added to the loan,” said CFPB Director Richard Cordray on a call to discuss the lawsuit. “It is typically not suitable for borrowers who are facing long-term financial hardship. And the longer a borrower is in forbearance, the more their loan balance increases.”

Forbearance is also easier for Navient to process, requiring only a few minutes, Cordray said. Helping borrowers with income-based repayment plans, which pegs monthly payments to an individual’s income and family size, requires paperwork and longer discussions, he added. 

“Forbearance is thus a cheaper approach that saves Navient money,” he said. 

The CFPB’s investigation found that Navient added as much as $4 billion in additional interest charges to the principal balances of loans enrolled repeatedly in forbearance. 

“Every single one of the borrowers who is having their loans serviced by Navient or their companies, or impacted by their debt collector, has the potential to be impacted,” said Lisa Madigan, attorney general of Illinois, which filed its own lawsuit against Navient, as well as several subsidiaries. 

Her office’s lawsuit alleges that Sallie Mae placed borrowers into expensive subprime loans that were “designed to fail.” Many were given to students at what she called “the worst schools,” or accredited for-profit colleges. Many of those schools, such as Corinthian Colleges, have become embroiled in difficulties amid allegations that they promised certain careers to prospective students yet failed to deliver quality instruction. 

Navient called the lawsuit politically motivated. 

“The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit -- midnight action filed on the eve of a new administration -- reflects their political motivations,” the company said in a statement. “Navient has a responsibility to its customers, shareholders, and employees to defend itself -- publicly and in court -- against this unsubstantiated, unjustified and politically driven action.”