Navient Engaged in Unfair and Deceptive Lending and Failed to Offer Proper Repayment Plans to Students
HARRISBURG — Attorney General Josh Shapiro filed a lawsuit against the nation’s largest servicer of federal and private student loans, Navient Corporation, and its subsidiary Navient Solutions, LLC, over widespread abuses in their student loan origination and servicing businesses.
“Navient’s deceptive practices and predatory conduct harmed student borrowers and put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans,” Attorney General Shapiro said. “The more businesses like Navient put their bottom line ahead of the interests of their customers and consumers, the more vigilant we will be to protect Pennsylvanians and hold businesses like Navient accountable for their misconduct.”
The lawsuit, filed today in the U.S. District Court for the Middle District of Pennsylvania, could impact hundreds of thousands of Pennsylvanians. This includes anyone who received private student loans from Sallie Mae, one of Navient’s predecessors, and anyone who has had their federal or private student loans serviced by Navient and has experienced issues with repayment.
As of September 2017, Pennsylvania residents had filed 1,059 complaints against Navient with the Consumer Financial Protection Bureau.
Pennsylvanians collectively owed $61.8 billion in private and federal student loans as of December 2016. The average student loan debt for Pennsylvania college graduates in 2016 was $35,759 – the second highest of any state in the nation.
Navient and its predecessor Sallie Mae have been involved in student lending for decades – from the origination of loans to their servicing. During this time, Navient grew its student loan company into one of the country’s largest by engaging in practices that repeatedly harmed borrowers, such as:
Making predatory loans to students attending for-profit or non-profit colleges with graduation rates lower than 50 percent, despite clear expectations that an extremely high percentage of students would not be able to repay them.
Increasing its misleading subprime lending, while disregarding evidence that these loans would likely default at extraordinarily high rates. Navient used these subprime loans as the “baited hook” to become a “preferred” lender at schools, which increased its volume of more profitable loans: federal loans and prime private loans.
Beginning in 2009, Navient committed unfair and deceptive acts by steering student borrowers into short-term loan forbearances that instead continued for the long term – accruing interest and adding to the loans’ principal that students were required to repay. Navient should have been helping the borrowers apply for income-driven repayment plans during this time. From 2010 to 2015, Navient added up to $4 billion in interest charges in this way to the principal balances of borrowers.
“Navient repeatedly engaged in misleading practices meant to boost their profits at the expense of Pennsylvania students,” Attorney General Shapiro said. “They crossed the line in pursuit of profit and we’re here to change their behavior and help the people who’ve been harmed.”
The Office of Attorney General’s lawsuit asks the court to order:
Full restitution to all borrowers affected by Navient’s unlawful practices
Disgorgement by Navient of unlawfully gained profits
Civil penalties to be determined
Rescission or reformation of all contracts or loan agreements between Navient and Pennsylvania consumers affected by the company’s unlawful practices
Navient to cease collecting on – and delete any negative credit information it has furnished to consumer reporting agencies – the illegal loans at issue in the lawsuit.
Navient maintains a student loan servicing center in Wilkes-Barre with approximately 1,000 employees. Student borrowers who believe they have been subject to these or other unfair or deceptive practices are encouraged to file a complaint with the Office of Attorney General at https://www.attorneygeneral.gov/Complaints/Consumer_Complaint_Form/. They can also call 800-441-2555 or email firstname.lastname@example.org.
The Pennsylvania Office of Attorney General’s complaint is available here.