California Sues Student Loan Company Navient

By William Vogeler, Esq. on July 06, 2018 | Last updated on March 21, 2019

California joins a growing number states in lawsuits against Navient, the largest student loan company in America.

The complaints allege the lender steered borrowers to payment options that cost them more money. With the forbearance option, for example, loan balances get larger.

Navient says it has done nothing illegal. But it doesn't look good for the company, students, or the economy.

Harmful Debt Collection

It's not just that students got into bad loan options. In California, Attorney General Xavier Becerra says Navient engaged in harmful debt collection practices against students who defaulted.

Becerra said the company needs to be held accountable for actions that have "compounded the misery of parents and students who sacrificed to pay for college," the Washington Post reported.

The company faces lawsuits in Illinois, Washington, and Pennsylvania, along with a complaint filed by the Consumer Protection Bureau. The Justice Department also fined the company millions of dollars for wrongfully charging high-interest rates and late fees.

Navient CEO Jack Remondi said the complaints are "unfounded" and politically driven. "The need to blame someone has driven these lawsuits," he said.

Cost of Defaults

Six months ago, the Wall Street Journal reported that 4.6 million Americans had defaulted on federal student loans. That included 274,000 who had defaulted in the last three months of 2017.

The defaults represented 22 percent of all Americans who had federal student loan debt. The report did not account for people with private loans.

Business Insider said the defaults -- on the scale of $84 billion -- have repercussions for the entire economy. Defaulting borrowers will have a hard time buying homes, and taxpayers generally will have to absorb the cost.

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