Student loan case echoes past crisis in mortgages
A man in Boston rolled several student loans into one, and his balance doubled overnight, with no explanation.
Near Chicago, a 39-yearold former graduate student who had a financial windfall sent in a $10,000 check to pay off his loans — and the payment was promptly lost.
The same thing happened to a woman in Maryland, who uncovered the problem three years later, after her loan had grown by $11,000.
And in New York City, a 41-year-old homeless man, who should qualify for reduced monthly payments, has been pleading for a break on his loan payments but says that no one is listening.
Sound familiar?
State and federal lawsuits filed this week accused Navient, the largest collector of student loan payments in the nation, of the kind of sloppiness and misleading tactics that emerged in the mortgage market in the years after the financial crisis.
The company, which is fighting the lawsuits, has denied wrongdoing.
“Navient has a wellestablished, superior track record of helping student loan borrowers succeed in repayment,” Patricia Nash Christel, a company spokeswoman, said in a written statement. “We will vigorously defend against these false allegations.”
The accusations against Navient, by the nation’s consumer watchdog agency and attorneys general in two states, are aggravating a student loan crisis that has swept the United States. Student loan debt has surged to $1.4 trillion, eclipsing the totals for auto loans and credit cards, and burdening a generation with a mountain of debt just as its members try to find their financial footing.
In recent years, the Obama administration has significantly expanded programs that allow people with federal student loans to cap their monthly payments at a fixed portion of their income. More than 80 percent of outstanding U.S. student debt is in the form of federal loans, and most of the borrowers carrying that debt are eligible for such income-based payment plans, but enrolling in the programs can be complicated.
Navient, which services the loans of roughly 12 million current and former students across the country, is responsible for keeping track of monthly payments on more than $300 billion in loans.
It also has tremendous power — and leeway — in shepherding struggling borrowers through the process of either capping their monthly payments based on income or finding other ways of reducing those payments.
Guiding these borrowers takes time and training. Navient, the lawsuits say, steered clients toward options that were simpler for the company.
The roots of suits filed against Navient this week stretch back years. From October 2012 to March 2013, the consumer bureau logged more than 600 complaints about Sallie Mae, from which Navient split off in 2014, accounting for nearly half of all the complaints about student lenders during that period. That number grew rapidly: The agency’s database now holds more than 11,000 complaints against Sallie Mae and Navient.
“Complaints reported to CFPB represent fewer than one-tenth of 1 percent of Navient customers and have been consistent with or below the market share of the loans we service,” said Christel, of Navient.
Unless Navient agrees to settle, the lawsuits are likely to take years. The consumer bureau, and the attorneys general, said they were seeking restitution and a change in the company’s practices.