Navient was accused of deceptive student loan practices.
In a major ruling yesterday, a state court in Washington found that Navient, one of the nation’s largest student loan servicers, NAVI +2.1% deceived scores of student loan borrowers and cosigners.
The suit, brought by Washington Attorney General Bob Ferguson, alleged that Navient engaged in numerous practices that deceived and harmed student loan borrowers. Among them were actions pertaining to so-called “co-signer releases.”
While federal student loans typically do not require (or even allow for) a cosigner, private student loans often do. Since many student loan borrowers do not have sufficient credit history at the time that they apply for a student loan, a private student loan lender may require a cosigner to justify issuing the loan.
Ferguson’s lawsuit against Navient alleged that the company deceived student loan borrowers and cosigners about their ability to release the cosigner on a loan at a later date if certain criteria were met — such as making on-time payments for consecutive months over the course of years.
Navient allegedly made seemingly arbitrary decisions designed to block cosigners from being released on the cosigned student loans. For example, cosigners and borrowers who paid their student loan bills early, or who paid several student loan bills in advance through a lump sum payment, were denied relief. A borrower with a $100 monthly student loan bill who paid $300 to get ahead on several bills in advance would effectively get penalized, for example.
Judge Veronica Alicea-Galván ruled on Friday that Navient’s conduct regarding cosigner releases was unfair or deceptive, and granted Ferguson’s motion for summary judgement. Other allegations against Navient in Ferguson’s suit will proceed to trial.
Navient has denied any wrongdoing and expressed disappointment in the court’s decision.
“I will protect student loan borrowers from lenders that deceive Washingtonians,” Ferguson said in a statement. “Too many student loan borrowers in Washington are struggling to stay afloat. We will continue seeking accountability for Navient’s unlawful conduct and student loan relief for thousands of Washingtonians who were treated unfairly.”
This is just the latest development in Navient’s ongoing legal troubles. A long-running lawsuit against the company brought by the Consumer Financial Protection Bureau (CFPB) in 2017 is ongoing. The CFPB alleged in its suit that Navient’s practices failed student loan borrowers “at every stage of repayment,” and the company “failed to perform its core duties.” Navient settled a lawsuit last year brought against the company alleging unfair and deceptive servicing practices for borrowers seeking Public Service Loan Forgiveness. Navient admitted no wrongdoing as part of the settlement.
Last month, a federal administrative law judge ruled that Navient must repay the government over $22 million for allegedly overcharging the Department of Education for student loan subsidies. And student loan borrowers tried to force Navient into an involuntary bankruptcy for allegedly charging borrowers for student loans that had already been discharged. A judge last week dismissed that suit, which Navient had claimed was frivolous.
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Adam S. Minsky is an advocate, innovator, and entrepreneur who established a unique law practice devoted entirely to assisting student loan borrowers and their families.