It is past time for the king of “you’re fired” to fire Navient and terminate contracts with all loan servicers who engage in deceptive and fraudulent practices in an effort to deceive borrowers.
By: Natalia Abrams
Executive Director, Student Debt Crisis
Tuesday, April 25th, marks the fifth year since the total outstanding balance for the 44 million Americans who have student loan debt has reached a collective $1 trillion. Since then, that balance has grown by more than $400 billion, making student loan debt the second-highest source of consumer debt in America, second only to mortgages. Advocates, borrowers and students across the nation commemorate April 25th to bring attention to this ever growing crisis.
Central to the problem of the student debt crisis are failures by student loan servicing companies with no incentive to help borrowers. Coupled with a complete lack of oversight from the Department of Education, America now faces a system that allows corporations to rake in billions of dollars in profits off the backs of student loan borrowers.
The nation’s largest student loan servicer, Navient, formerly Sallie Mae is currently facing several lawsuits brought by the Consumer Financial Protection Bureau (CFPB), and a host of other state attorneys general nationwide. For decades, companies like Navient and Sallie Mae were able to bully and financially ruin millions of student loan borrowers through predatory practices. In legal files for the recent lawsuits, Navient explicitly stated that “there is no expectation that the servicer will act in the interest of the consumer.” In fact, the suits highlight a long history of shameful business practices, including: misapplying payments, steering borrowers towards costly repayment options and destroying the credit scores of veterans. With no motivation to help borrowers out, Navient has instead made it harder to repay. It is past time for the king of “you’re fired” to fire Navient and terminate contracts with all loan servicers who engage in deceptive and fraudulent practices in an effort to deceive borrowers.
Borrowers are also under assault from those whose job it is to help them; not only from student loan servicers like Navient, but from Trump’s Department of Education itself. Under the brief tenure of controversial Education Secretary Betsy DeVos, the Department has taken major steps in rolling back Obama-era protections for student loan borrowers. DeVos’s actions now allow for poor performing and predatory student loan servicers to access high-paying contracts with the federal government, despite years of abuses by these companies.
Also under DeVos, the department rescinded a directive that prohibited costly fees to the tune of 16%, being applied to defaulted FFEL (Federal Family Education Loans) student loans. The result of this action is that the most vulnerable student loan borrowers will face unfair additional fees, making already difficult financial situations even harder for struggling student loan borrowers.
Student loan debt has tipped to $1.4 trillion. Student Debt Crisis and other groups have joined together to send letters to the Department of Education asking them to fire Navient as a servicer of federal student loans. Over 10,000 people have signed on asking for the same thing in order to protect the hard-fought protections to borrowers over the past few years.
Beyond firing Navient, there are a number of solutions to the ever-growing student debt crisis that consumer advocates have supported to help ease the burden on student loan borrowers. To begin with, lawmakers should allow for refinancing of both federal and private student loans, allowing borrowers to take advantage of historically low interest rates and lower their monthly payments. Secondly, we should simplify and strengthen existing repayment plans, such as Income-based Repayment and the Public Service Loan Forgiveness program. Next, student loans should be afforded broad consumer protections that other types of consumer financial products enjoy and, finally, as a spokeswoman for Navient recently affirmed, bankruptcy protections should be extended to all student loans.
Student Debt Crisis is a non-profit (501c4) organization dedicated to fundamentally reforming student debt and higher education loan policies.