Pennsylvania Attorney General Josh Shapiro has sued Navient for widespread student loan abuses.
Pennsylvania’s Attorney General Josh Shapiro has filed a lawsuit against Navient, one of the largest student loan servicing companies in the United States.
The office of the Pennsylvania Attorney General issued a press release on October 5th announcing the news. The Keystone State is now the third state that has filed a lawsuit against Navient.
The lawsuit is against both Navient Corporation and the subsidiary company, Navient Solutions, LLC. Shapiro cites widespread abuses in Navient’s student loan origination and servicing businesses.
Attorney General Shapiro issued the following statement for the press release: “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.”
Shapiro had the lawsuit filed in the U.S. District Court for the Middle District of Pennsylvania. According to the press release, hundreds of thousands of student loan borrowers from Pennsylvania could be impacted. Any student debtor that received a private student loan from Sallie Mae or had their federal or private student loans serviced through Navient and experienced repayment issues has a stake in the outcome of this lawsuit. Sallie Mae is one of Navient’s predecessors.
Residents of Pennsylvania have submitted 1,059 complaints against Navient through the Consumer Financial Protection Bureau (CFPB). That complaint total includes September of 2017.
According to the office of the Pennsylvania Attorney General, Navient was issuing predatory loans to students attending both for-profit and nonprofit higher education institutions. Many of these schools had graduation rates lower than 50 percent, and Navient expected that many of the borrowers would not be able to repay the educational loans.
Shapiro’s office also accuses Navient of increasing its misleading subprime lending. Navient ignored the fact that many of these loans would default at very high rates, and instead used subprime loans to increase its number of profitable loans.
Finally, the student loan company has been accused of pushing student debtors into short-term loan forbearances that actually continued into the long-term. This allowed for the loans to accumulate interest and added to the total amount the students needed to repay. Shapiro argues that Navient should have been steering students to income-driven repayment plans.
Attorney General Shapiro’s lawsuit recommends to the court a few punishments for Navient. First, he is seeking full reimbursement for each and every student debtor impacted by Navient’s practices. Second, any profits made by Navient through their unlawful practices need to be taken away. Third, a number of civil penalties should be handed down. Fourth, any contracts or loan agreements made between Navient and Pennsylvania borrowers need to be either rescinded or reformed. Finally, Navient must stop collecting on any unlawful student loans and also get rid of any harmful credit information it may have reported to the credit bureaus.
It has certainly been a busy week for Navient. In addition to this lawsuit, Navient also announced that they had acquired online student loan lending company Earnest for $155 million. That story was covered by The Student Loan Report yesterday.
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