Yesterday, Washington State Attorney General Bob Ferguson filed a lawsuit against Navient, the country’s largest student loan servicing company, and announced legislation for Student Loan Bill of Rights legislation, according to a press release from the Attorney General’s office.
“Enormous student-loan debt is an issue for many Washingtonians,” Ferguson said. “I will hold companies accountable when they treat borrowers unfairly.”
The lawsuit filed by Ferguson is similar to the lawsuit the Consumer Financial Protection Bureau (CFPB) filed against Navient last week. The suits were the result of an investigation by the CFPB, Washington, and Illinois into Navient’s loan servicing practices.
The accusations in the lawsuits include purposely misleading borrowers toward short-term forbearance or deferment instead of the more generous income-driven repayment plans, not keeping borrowers informed of critical income-driven repayment plan re-enrollment deadlines, and handing out subprime, predatory loans to students at schools with a less than 50 percent graduation rate.
But that’s just the beginning: Other allegations state that Navient offered a cosigner release promotion where friends and family members could cosign on a loan, with the understanding that once the borrower showed an ability to make continuous on-time payments, the cosigner could then apply to be released. Unfortunately, Navient made it extremely difficult for those cosigner releases to be approved.
In addition, the states claim that when the company called delinquent borrowers, it tried to collect more money than needed to make the accounts current.
This investigation has prompted Ferguson to propose the Student Loan Bill of Rights in an effort to protect Washington residents from unfair loan practices. The legislation would create standards for student loan servicers, as well as appoint a third-party to resolve student complaints and provide educational tools for borrowers. Connecticut, California, and Washington, D.C. have all passed similar legislation.
Navient is the largest student loan servicer in the United States, covering both federal loans and private student loan options. It deals with a significant portion of the massive block of student debt ($1.4 trillion and counting) that is currently plaguing graduates throughout the country.
Image Copyright Richard Ricciardi.