Navient Fraudulent Servicing of Student Loans Class Action

Navient services student loans. The complaint for this class action alleges that it has engaged in unlawful practices that defraud borrowers, including the manipulation of its student loan servicing practices to gain profit for itself and to mislead borrowers. The defendants in this case include Navient Corporation, Navient Solutions, LLC (formerly Navient Solutions, Inc. and Sallie Mate, Inc.), and SLM Corporation (Sallie Mae).

The Nationwide Class for this action is all individuals in the US and its territories who have ever had any loans with the defendants in this case or had any loans, whether private or federal, serviced by these defendants at any time. State subclasses have been defined for Delaware, Florida, New Jersey, and New York.

In its second paragraph, the complaint quotes a statistic claiming that in the US approximately 45 million people owe $1.67 trillion in student loans. It also says that roughly a quarter of the borrowers are either in default or having trouble making their monthly payments. According to the complaint, all this debt is a drag on the economy and on personal finances: “Student loan debt delays homeownership by years, costs borrowers around hundreds of thousands in lost retirement savings, and significantly reduces lifestyle qualities.”

Navient is the largest servicer of student loans in the country, working with over 12 million borrowers and $300 billion in federal and private student loans. It processes payments, helps borrowers enroll in alternative payment plans, and communicates with borrowers about their loans.

As borrowers make payments, Navient applies them to their loans. “When these payments are applied correctly,” the complaint says, the principal amount shrinks, meaning the borrower will pay less in interest and spend less time in debt.” However, this is a disadvantage to the lender, who loses revenue when borrowers get out of debt and pay less interest. The complaint alleges, “[Navient has] worked tirelessly to ensure the latter does not happen.”

How does it do this? The complaint alleges it misallocates payments, uses hidden repayment terms and vague billing statements, and provides misleading answers to questions. The complaint’s table of contents alone lists a number of alleged actions and practices, including the following:

Trying to keep principal balances high.
Misallocating payments to interest instead of principal.
Allocating payments to loans with lower rather than higher interest rates.
Charging artificially inflated minimum interest payments.
Providing misleading information, or concealing information, about loans.

In 2017, the Consumer Financial Protection Bureau (CFPB) filed a suit against Navient for predatory loan practices. Attorneys general in several states have filed lawsuits with similar allegations, and a number of private parties have filed suits as well.

The complaint alleges fraud and a breach of fiduciary duty.

Article Type: Lawsuit
Topic: Loans

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