Navient Subjected to Yet Another Lawsuit
The United States largest student loan servicer, Navient, is faced with another lawsuit. This time, shareholders have filed a lawsuit against the Wilmington-based student loan provider. During the past year, shareholders allege the company withheld information concerning subprime student loans.
Shareholders are angered over the loss of value. Navient had “recklessly” withheld details of loan operations according to the claim. One of the plaintiffs, investor Melvin Gross stated he purchased “securities at artificially-installed prices.”
This isn’t the first time Navient has faced a lawsuit. It’s been a controversial year. Navient has been accused of a number of unfair and deceptive practices.
In January of this year, the Consumer Financial Protection Bureau or CFPB filed a lawsuit against the student loan servicer. Navient “systematically and illegally” failed borrowers according to the organization. According to the lawsuit, borrowers who were having problems with repayment were steered away from the income-driven repayment plans and encouraged them to enter forbearance.
Income-driven repayment plans make repayment of loans more manageable by lowering the monthly payment. Borrowers who enter forbearance have a temporary stop placed on their payments. However, in forbearance, unpaid interest continues to pile on top of the principal balance.
Furthermore, a lawsuit was filed in January 2017 by the Washington State Attorney General Bob Ferguson against Navient. Allegations in Washington State are similar to those filed by the CFPB, steering borrowers in the direction of forbearance, rather than income-driven repayment plans. The Washington State lawsuit also accuses Navient of engaging in misleading and aggressive tactics of collection.
In addition to the shareholder's lawsuit, another state filed a lawsuit against Navient. In October of this year, Josh Shapiro, Attorney General for the State of Pennsylvania, filed a lawsuit alleging that Navient was responsible for widespread abuses.
In the Pennsylvania Attorney General’s statement, student borrowers were harmed by Navient’s “deceptive and predatory conduct.” AG Shapiro accused Navient of putting “their own profits” before the interest of loan borrowers across the nation.
The Pennsylvania lawsuit may possibly impact hundreds of thousands of borrowers from this state alone. This includes student borrowers who had their private or federal loans serviced through Navient. The lawsuit also covered certain private loans issued through Sallie Mae, a private student loan company who was affiliated with Navient before splitting into separate entities in 2014.
Following the filing of Pennsylvania’s lawsuit, Navient share price dropped more than 14 percent. More than $500 million in market value dissapeared by this sizeable drop in share prices. Investors of Navient, such as Gross, were frustrated by the revelation of buying into a company where stock prices were “artificially-inflated.”
It is unclear how much money in damages these lawsuits are seeking. All these claims are being contested by Navient. Restitution is hoped for in December of this year and later in 2018.
In a statement issued by officials from Navient, the company “will vigorously defend our record in court.” Navient believes after an unbiased court of law reviews the facts of the case, they will prevail. As of this moment, all these claims are just allegations.