Pennsylvania sues student loan provider

Pennsylvania’s attorney general accused the nation’s largest student loan company of engaging in abusive practices in a lawsuit filed Thursday that alleged it has improperly added billions of dollars in costs for borrowers.

The complaint in federal court in Harrisburg, Pa., said Navient Corp. and subsidiary Navient Solutions LLC sold “risky and expensive” subprime loans and damaged borrowers and co-signers by failing to perform core loan servicing duties.

“The evidence will likely show that (1) there has been a profound impact on the financial lives of borrowers who were sold risky subprime loans by the defendants, (2) many borrowers have had to delay starting a family, (3) many borrowers have been unable to save for the down payment on a home, and (4) others have not been able to start their own business,” the lawsuit alleged.

It claims the companies funneled people into a program that added massive interest costs when they should have been directing them into repayment plans indexed to income.

A statement from Navient called the allegations completely unfounded and said it complies with federal rules for student loans.

The lawsuit accuses Navient of violating state and federal consumer protection laws and seeks a court order directing them to change practices, make restitution to borrowers and pay back any profits they made from the alleged practices.