Pennsylvania Attorney General Sues Nation's Largest Student Loan Servicer
Less than a year after the Consumer Financial Protection Bureau filed a federal lawsuit accusing the largest student loan servicing company in the country of "systemically and illegally failing borrowers at every stage of repayment," the Pennsylvania Attorney General followed suit, claiming loan servicing giant Navient "put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans."
Navient is in charge of some $300 billion in student loan debt after it split with Sallie Mae in 2014, and could be on the hook for that company's subprime student loans and loan servicing shenanigans.
Attorney General Josh Shapiro claims Pennsylvanians owe some $61.8 billion in private and federal student debt and Pennsylvania residents lodged over 1,000 complaints regarding Navient with the CFPB. Navient and Sallie Mae are accused of making predatory loans to students attending schools that graduate less than half of their enrollees, with the clear expectation that an extremely high percentage of students would default on those loans. Navient then used these subprime loans to become a "preferred" lender at schools, a status that could increase its volume of more profitable federal and private loans.
The lawsuit also claims Navient steered student borrowers into short-term loan forbearances (rather than income-based repayment plans) that accrued more interest and added to the loans' principal. From 2010 to 2015 alone, Navient added up to $4 billion in these interest charges to the borrowers' principal balances.
The attorney general's suit is asking for full restitution to all Pennsylvania borrowers affected by Navient's allegedly unfair and deceptive practices, as well as disgorgement by Navient of its ill-gotten profits. Perhaps most importantly for current debtors, the suit wants to force Navient to cease collecting on the illegal loans, as well as delete any negative credit information it has furnished to consumer reporting agencies.
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