Government Sues America's Largest Student Loan Company for Allegedly Cheating Borrowers

Jon Howard
January 21, 2017

In addition to the servicing claims, IL and Washington allege that Navient and its former parent company Sallie Mae peddled "risky and expensive" subprime private student loans that carried high interest rates and fees.

The CFPB's accusations are also central to separate lawsuits filed Wednesday by Illinois Attorney General Lisa Madigan and Washington Attorney General Bob Ferguson against Navient.

"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", the company said.

U.S. PIRG has always been concerned with TCF Bank, which targets all consumers but looks at students as lucrative new customers; the University of Minnesota football stadium is even named for the bank. It's not always the same company that lent you money in the first place.

Navient broke off from Sallie Mae in 2014 and handles more than 12 million student loan accounts. Federal borrowers serviced by Navient are 31 percent less likely to default than their peers at other servicers. The consumer protection agency has been examining the company's business practice since 2013.

The lawsuit is a major wake-up call for the student loan servicing industry as a whole.

"What they're saying is that what you've done is so wrong, you're going to have undo all of these transactions to tie them up the way they should have been tied up", said Norris. Also, there's no guarantee you'll be better off with a different servicer.

However, she says more needs to be done.

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Mr Abbas will see Pope Francis and inaugurate the new Palestinian embassy to the Vatican on Saturday, before travelling to Paris. The settlements, home to about 600,000 Israelis, are considered illegal under global law, though Israel disputes this.

The Consumer Financial Protection Bureau announced Wednesday it is also suing Navient for the same reasons in Madigan's lawsuit.

One problem the House group says it found is Cordray's "failure to heed" CFPB attorneys who advised him to publish a list of institutions the bureau believed would be subject to the proposed rule and to re-open the public comment period after it had closed.

The CFPB, since its establishment in July 2011, has refunded or provided other relief totaling over $11.8 billion dollars to 29 million consumers harmed by financial fraud and schemes such as the ones above.

"We receive thousands of complaints", Frotman said.

Anyone with questions about student loan servicers should read the Attorney General's new student loan guide.

A growing number of older borrowers have their Social Security benefits offset by the federal government because of unpaid student loans, the report noted, and many of them struggle to afford basic needs.

This allegedly led to the credit score of some of the company's borrowers being hurt. You can get one free credit report every year from each of the three major credit bureaus. "And it is compounded by entities like Navient who do not play by the rules and make life exceedingly hard for those borrowers to do the simplest of tasks". The program was created to help customers stay current on their loans and, unlike federal program solutions, make progress on repaying their principal balance. "These unlawful practices have cost student loan borrowers across the country both heartache and money". Income-driven repayment plans allow borrowers to pay a percentage of their discretionary income. The major issue with their loan programs was that it had very high interest rates which were given to students in sub-quality schools.

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