Why California’s AG Is Suing Navient and What it Means for Borrowers
California Attorney General Xavier Becerra recently announced his plan to sue student loan servicing company Navient.
On June 28, California Attorney General Xavier Becerra announced plans to sue student loan servicing company Navient based on allegations of widespread abuse over debt payment collections. This is the latest in a growing number of state lawsuits against the company.
Becerra alleged the company violated state laws from encouraging borrowers to postpone their payments through forbearance, an option that includes accruing interest and increased costs, versus enrolling in income-driven repayment plans that avoid fees, according to a statement from the California AG’s office.
In addition, the attorney general accused Navient of misrepresenting amounts owed by delinquent borrowers as well as allegedly failing to release permanently disabled federal student loan borrowers. Becerra has also implicated Pioneer Credit Recovery and General Revenue Corp., Navient’s debt collection agency subsidiaries, of making illegal misrepresentations regarding the federal loan rehabilitation program for defaulted borrowers.
He said in a statement regarding the company, “Navient’s loan servicing abuses have compounded the misery of parents and students who sacrificed to pay for college. Our students can’t afford to be cheated out of any more money than they legally owe simply because Navient knew how to game the system.”
The nation’s largest state joins Pennsylvania, which kicked off these growing state lawsuits back in October 2017, followed by Illinois and Washington lawsuits that have questioned Navient’s handling of student loans.
There’s more as the Consumer Financial Protection Bureau filed a lawsuit at the end of the Obama Administration, alleging that Navient had misallocated payments, steered struggling borrowers toward multiple forbearances rather than income-driven repayment plans, and gave blurry instructions for re-enrollment in income-driven repayment plans and qualifications for co-signer releases.
In response to California’s suit, Navient CEO Jack Remondi said the allegations are “unfounded” and suggested instead of going after the company the industry should take action by improving students’ financial literacy prior to attending college, raising graduation rates, and streamlining student loan repayment programs.
“The lawsuit is another attempt to blame a single servicer for the failures of the higher-education system and the federal student loan program to deliver desired outcomes,” Remondi commented in a statement.
As to the lawsuits’ effect, Navient is one of the nation’s largest servicers contracted by the government to collect and manage part of the $1.5 trillion of student loan debt owed by the almost 44 million people. The company’s piece of the industry’s pie has it conducting loan services for 12 million borrowers; California’s borrowers are estimated at 1.5 million, according to the California AG’s office.
For borrowers seeking compensation from the lawsuits, the CFPB case has asked Navient to compensate those who were harmed. As for the state lawsuits, which could take years to sort, the Education Department earlier this year delivered new guidance that student loan debt collectors, including Navient, only have to comply with federal regulations—sometimes more lax—to the disregard of state regulators.
To determine one’s federal loan servicer, notably Navient, log onto the Federal Student Aid website.