Navient, the nation’s largest servicer of student loans, has misled borrowers for years with respect to its policies and practices, costing them millions of dollars, according to a lawsuit filed Wednesday by a federal regulator.
The Consumer Financial Protection Bureau, the same agency that went after Wells Fargo and aired out all its dirty laundry, filed a lawsuit in a federal court in Pennsylvania alleging that Navient and its preferred collector, Pioneer Credit Recovery, have engaged in “unlawful acts and practices in connection with defendants’ servicing and collection of student loans.”
“The bureau seeks to obtain permanent injunctive relief, restitution, refunds, damages, civil money penalties, and other relief for defendants’ violations of federal consumer financial laws,” the filing reads.
According to the filing, the company formerly known as Sallie Mae Inc. is the largest servicer of student loans in the United States. It services the loans of 12 million borrowers, including 6 million under a contract with the U.S. Department of Education, and handles more than $300 billion in federal and private student loans.
“Navient’s principal responsibilities as a servicer include managing borrowers’ accounts; processing monthly payments; assisting borrowers to learn about, enroll in, and remain in alternative repayment plans; and communicating directly with borrowers about the repayment of their loans,” the filing says.
The suit alleges that Navient has failed at its core duties by deterring borrowers from obtaining access to long-term, affordable repayment plans and misleading them on how forbearance can be more costly to them in the end. It says that Navient buried a lot of useful information for borrowers in small print and, in other instances, hid information altogether that might have helped borrowers make better decisions about their repayment plans.
“Taken together, these practices prevented some of the most financially vulnerable borrowers from securing some or all of the benefits of plans that were intended to ease the burden of unaffordable student debt,” the filing says.
Navient is also accused of misreporting information to consumer reporting agencies, damaging their credit.
Student debt is a hot-button topic across the country as more graduates are coming out of school crippled by unaffordable student loan payments.
If this lawsuit leads to even a fraction of that student loan debt being reduced as a penalty, that would make a lot of people very happy.