Navient is under fire for more student loan issues—this time related to their overall business strategy.
One of the state attorney generals suing Navient said “[t]hese loans were designed to fail . . .”
According to new details from the state lawsuits, Navient allegedly used subprime loans as part of an overall business strategy. Subprime loans, notably, are part of what fueled the mortgage crisis in recent years.
Navient was sued earlier this year by the CFPB
Earlier this year, Navient was sued by the Consumer Financial Protection Bureau, alleging that “Navient has failed to perform its core duties in the servicing of student loans, violating Federal consumer financial laws as well as the trust that borrowers placed in the company.”
The allegations included a laundry list of complaints about how Navient provided service (or lack thereof) to student loan borrowers. In other words, that lawsuit alleges that Navient did not provide proper service to consumers that already had student loans.
The state lawsuits allege Navient issued loans to borrowers that were highly likely to default
The two state lawsuits appear to aim even deeper–by alleging that Navient apparently had a business strategy built around issuing loans that it knew borrowers were unlikely to repay.
According to an internal memo that was cited in the Illinois lawsuit, Navient used private loans to build relationships with various colleges and lenders across the country. Navient allegedly expected that the subprime private loans would have default rates as high as 92 percent.
According to that same internal memo, Navient would then use those loans to obtain more federal loans as part of an overall business strategy.
What’s the benefit of federal loans? Those loans are guaranteed by the federal government in the event of default. And they also cannot be discharged in bankruptcy.
Keep tabs on both lawsuits
Right now, all of the lawsuits are active and unresolved. Navient is denying the allegations. That said, the outcome of one of both of these lawsuits could impact a huge number of student loan borrowers.
With that in mind, keep close tabs on both lawsuits. And if you need help with student loans—from Navient or elsewhere—be sure to contact a consumer rights attorney for assistance.
The post Lawsuits Allege Navient Issued Loans Designed to Fail appeared first on Minnesota Consumer Attorney.
