Navient has responded to an announcement from the attorney general of California that he plans to sue the student lending giant, as well as its due collection subsidiaries.
“The allegations are unfounded, and 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,” Navient President & Chief Executive Jack Remondi said in a statement that was issued on Friday.
Xavier Becerra, the AG of California, announced his intention to sue Navient last week. Navient and its subsidiaries were being accused of violating state unfair competition and false advertising laws for, among other things, misrepresenting the present amount due by delinquent borrowers, providing false information related to collection fees on rehabilitation, and steering borrowers toward more expensive repayment plans.
In its statement, Navient pointed out that servicers that collect on loans on behalf of the Department of Education do not:
- License schools to operate
- Admit students or set tuition prices
- Determine loan eligibility, loan amounts or loan terms
- Make, own or have a financial interest in the loans
- Design the complex and confusing repayment options and enrollment requirements for borrowers
- Provide financial advice to students and families about the total cost of earning a degree, how much to borrow and whether the amount borrowed is reasonable as all of these decisions are made prior to the servicer entering the picture. The need to blame someone has driven these lawsuits. Ironically, to date, this focus has been on the one servicer, Navient, that leads the industry with the lowest default rates and the highest enrollment in alternative repayment programs. If the parties were truly interested in addressing the real issues in higher education and student debt, they would direct their focus to:
- Improve financial literacy of students and families and provide better information about the full cost of earning their degree and the cost of any debt incurred to finance that degree — before they enroll in college
- Work to increase graduation rates — dropping out of school is the single largest factor in student loan defaults, and
- Simplify the repayment programs and ease the enrollment process for these programs.
