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Washington AG announces lawsuit against student loan servicer Navient

Erin Fenner   January 18, 2017  

Three government officials announced lawsuits against the student loan servicer, Navient (formerly known as Sallie Mae), and Washington Attorney General Bob Ferguson is one of them.

“Our lawsuit alleges that while still operating as Sallie Mae, Navient engaged in unfair and deceptive practices in its student loans business, including predatory loans to students attending for-profit colleges with very low graduation rates,” Ferguson announced at a press conference Wednesday broadcast on TVW.

Ferguson’s office issued a press release Wednesday that detailed the accusations the state was making against Navient:

“While operating as Sallie Mae, Navient made subprime, predatory loans to students attending for-profit colleges with graduation rates lower than 50 percent, despite clear expectations that an extremely high percentage of students would not be able to repay them,” reads the release.

Ferguson said that any current or former student who used a private student loan could be impacted, and said that he expected “thousands of Washingtonians” could be affected.

AG allegations against the student loan servicer detailed in the release:

  • The AG is accusing Navient of “improperly steering financially distressed federal loan borrowers into short-term forbearances” wherein the borrower suspends payments of their loans, but interest continues to add onto the loan.
  • Navient is accused of failing to properly explain the yearly recertification requirements of “income-driven repayment programs” so that borrowers were penalized with payment increases.
  • Allegedly Navient failed to correctly allocate payments so that borrowers received “unnecessary collection calls.”
  • Navient is also accused of deception through its promotion of a co-signer release, which Ferguson said was portrayed as being a simple way for co-signers to be taken off the loan once the borrower demonstrates they can afford the monthly payments. In actuality few co-signers could be released, according to the AG release. “One requirement for co-signer release is making consecutive on-time payments. Navient applied this requirement in ways reasonable borrowers couldn’t have foreseen,” reads the release. “For example, if a borrower’s monthly payment is $100, but she makes a $300 payment one month, Navient would advance her due date and would send a bill with $0 due for the next two months. If the borrower did not send additional payments in response to those $0 bills, Navient would count that as a failure to make consecutive, on-time payments…”
  • Navient is also accused of attempting to collect more from delinquent borrowers than what would be necessary to address the delinquency.

Outside Washington

The Consumer Financial Protection Bureau and Illinois Attorney General Lisa Madigan also filed lawsuits against the company.

In a press release, Madigan said Navient’s practices harmed current and former students.

“My investigation found Sallie Mae put student borrowers into expensive subprime loans that it knew were going to fail,” she said in the release. “Navient’s actions have led to student borrowers needlessly carrying billions of dollars in debt and the company must be held accountable.”

Navient is denying the allegations the CFPB and the Illinois AG are waging. But, as of Wednesday afternoon, Navient hasn’t published a direct response to the Washington AG lawsuit on its site. Navient is calling the CFPB and Illinois lawsuits politically motivated.

“The allegations of the Illinois Attorney General and Consumer Financial Protection Bureau are unfounded, and the timing of these lawsuits—midnight action filed on the eve of a new administration—reflects their political motivations,” reads the Navient release.

Erin Fenner: erin@washingtonstatewire.com, @erinfenner

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