Dear Commons Community,
Navient, the nation’s largest servicer of student loans, is being sued by multiple federal and state regulators for misleading student borrowers and illegally driving up loan repayment costs for millions of them. A New York Times article is likening the scope of this lawsuit to that of the mortgage servicing industry subprime debacle in 2008.
As reported by the New York Times:
“Navient, the nation’s largest servicer of student loans, has for years misled borrowers and made serious mistakes at nearly every step of the collections process, illegally driving up loan repayment costs for millions of borrowers, according to lawsuits filed on Wednesday by a federal regulator and two state attorneys general.
Navient handles $300 billion in private and federal loans for some 12 million people — touching about one in four student loan borrowers. Every customer may have been affected by Navient’s misdeeds, said Lisa Madigan, the attorney general of Illinois, announcing her own lawsuit with the one filed by the Consumer Financial Protection Bureau.
Navient does not make the loans, but it holds lucrative contracts to collect payments each month on behalf of banks, government and other lenders.
The damages sought could reach billions of dollars, said Ms. Madigan, who sued Navient and Sallie Mae — which split into the two companies in 2014. Washington State’s attorney general, Bob Ferguson, filed a similar lawsuit against both companies.
The lawsuits describe routine mistakes and lapses in oversight that over time added up to systematic failures, eerily similar to the mortgage servicing industry’s bungling of borrower accounts and property foreclosures during the 2008 recession. Financial companies eventually paid more than $100 billion to settle mortgage-related lawsuits.
Navient mishandled loan payments, buried critical information in fine print and set obstacles for borrowers trying to release co-signers from their loans, among other failings, according to the consumer bureau’s legal filing.
The article rightfully goes on to question why the Obama administration waited so long to bring forward this suit and to file it on the eve of the last day of his administration.