(Occupy Corporatism) The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Navient, a private student loan servicer formerly known as Sallie Mae, for “systematically and illegally failing borrowers at every stage of repayment.”
Navient is accused of coercing students into borrowing money despite the fact that they were unqualified for such loans. Students that had trouble repaying because of Navient’s negligence in keeping the borrower informed of critical deadlines.
In addition, those making extra payments to get ahead of their debt found that Navient incorrectly processed those payments, charged the student late fees, interest charges and reported a negative rating to credit reporting agencies.
The CFPB explained in a statement: “Navient repeatedly misapplies or misallocates payments — often making the same error multiple times over many months. The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company.”
This lawsuit is one of 3 filed against Navient by government agencies for different aspects of the same issue.
Pioneer Credit Recovery, a subsidiary of Navient, also followed their parent company’s example by making unlawful representations about the federal loan program available to default borrowers in order to intimidate students.
Richard Corday, director of the CFPB said to the press : “Navient has systematically and illegally failed borrowers at every stage of repayment. These unlawful practices have cost student-loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again.”
The crackdown on Navient is one of several actions by the CFPB to protect American college students from predatory loan serving.
Last year the CFPB went after Bridgepoint Education (BPE) and their subsidiary Ashford University (AU) for “deceiving students into taking out private student loans that cost more than advertised.”
Since 2009, BPE has offered in-house private loans to students which the company then used the proceeds on the stock market because this entity is publicly traded. To ensure cash flow, BPE misled students as to the total costs of attending AU.
BPE has been ordered to forgive all outstanding student loans and refund monies paid by borrowers. In total $ 23.5 million is expected to be repaid to 1,277 students. The organization will also pay $8 million in fines.
Also in 2016, the the US Department of Education (DoE) announced a crackdown on for-profit higher education schools, starting with ITT Educational Service, Inc (ITT).
The Accrediting Council for Independent Colleges and Schools (ACICS) has called on the DoE to look at ITT for its failure to live up to the demands of accreditation. This fact is expected to close ITT’s 137 campuses and provide a pathway for student debt forgiveness for tens of thousands of students.
ITT did not set aside funding to off-set this reality and therefore the DoE is putting its full weight against the school.
Because of the mandates put forth by the DoE, ITT was no longer allowed to enroll new students who use federal loans or grants to pay tuition. In addition, ITT executives cannot give themselves bonuses or payout severance without first gaining DoE approval.
ITT was forced to abide by other restrictions, such as providing a letter of credit from banks loaning to ITT to show the school has the $247 million necessary to counter federal student-aid liabilities.
Ultimately, ITT closed their doors, leaving students in limbo concerning their debt and access to continued education.