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Lawsuits Accuse Navient of Cheating Student Borrowers Out of Millions, Soliciting ‘Risky’ Loan Advice

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Navient, the lending company that handles billions of dollars in private and federal loans for nearly 12 million Americans across the nation, has for years deceived borrowers and cheated them out of millions by illegally hiking loan repayment costs, according to a series of lawsuits brought by two state attorneys general and a federal regulator.

Their complaints, filed on Wednesday, Jan. 18, highlighted habitual mistakes and lapses in maintenance on the part of the loan servicer, which, over time, led to a number of serious systematic failures, The New York Times reported. Plaintiffs also accused the lending service of mismanaging loan repayments, concealing important information from borrowers in the fine print and setting obstacles that made it harder for borrowers to release co-signers from their loans.

Lisa Madigan, attorney general of Illinois, filed her own suit against both Navient and Sallie Mae (the companies split into two in 2014), in addition to another one announced by the Consumer Financial Protection Bureau. Washington State’s attorney general, Bob Ferguson, also brought a lawsuit against the two lending companies.

Madigan said all of Navient’s customers — one in four are student loan borrowers — were likely affected by the servicer’s violations, and that damages sought for the misdeeds could reach upward of a billion dollars. Her lawsuit also accused Navient and Sallie Mae of soliciting “risky and expensive” subprime private student loans with high interest rates and fees.

“Navient and Sallie Mae saddle students with subprime loans that Sallie Mae designed to fail,” Madigan told The Washington Post Wednesday. “Sallie Mae increased its unfair and deceptive subprime lending, while disregarding evidence that these loans would likely default at extraordinarily high rates.”

It should be noted that Navient and Sallie Mae do not make the loans, but manage the lucrative contracts needed to collect borrower payments each month on behalf of the government, banks and other money lenders, according to The New York Times.

The Consumer Financial Protection Bureau, the same agency that fined Wells Fargo last year for secretly opening hundreds of unauthorized customer accounts, also filed a suit against the loan servicer for reportedly engaging in “unlawful acts and practices in connection with defendants’ servicing and collection of student loans.”

CFPB argued that Navient garnered $4 billion in fees and interest charges to the principal balances of borrowers who had postponed their repayments through forbearances between January 2010 and March 2015. The company allegedly steered borrowers to defer their repayments, which accrue interest, rather than suggesting they enroll in an income-based repayment plan.

“The bureau seeks to obtain permanent injunctive relief, restitution, refunds, damages, civil money penalties, and other relief for defendants’ violations of federal consumer financial laws,” their filing read.

Navient has vehemently denied the accusations made by the CFPB, Madigan and Ferguson, and plans to fight back against the trio of lawsuits, The New York Times reported.

“The allegations of the Consumer Financial Protection Bureau are unfounded, and the timing of this lawsuit — midnight action filed on the eve of a new administration — reflects their political motivations,” Patricia Nash Christel, a spokeswoman for the company, said in a statement. “We will vigorously defend against these false allegations.”

Unsurprisingly, this isn’t Navient’s first time landing in hot water with a government regulator. The Washington Post reported that in 2014, the Department of Education fined the company $9 million for unlawfully charging active-duty service members higher interest rates and fees on their student loans.

Sen. Elizabeth Warren (D-Mass), a longtime critic of Navient, said on Wednesday that these latest suits against the loan servicer could very well “help put money back in the pockets of thousands of borrowers, including disabled veterans, who have been harmed by this company’s repeated lawbreaking.”

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