Jan 20, 2017 09:24 AM EST
Navient, formerly known as Sallie Mae, has been slammed with a lawsuit by the Consumer Financial Protection Bureau (CFPB). This is for misleading borrowers,bungled payment processing as well as allegedly cheating students out of lower repayment rates.
BuzzFeed News reported that Navient Corp.is America's largest student loan company, servicing $300 billion in loans by over 12 million borrowers.This means that one in four Americans who have student loans are serviced by the company.
The Department of Education has a contract with Navient to service 6 million federal student loans. The company processes payment as well as provides information and guidance to borrowers. The CFPB filed the lawsuit on Wednesday. It seeks financial relief for millions who have been burdened by what was deemed an unfair amount of interest rates.
The lawsuit came after Illinois Attorney General Lisa Madigan sued the company for saddling students with expensive subprime loans and that they "designed it to fail," she told CBS Chicago. She sued both Navient and Sallie Mae, which split back in 2014.
Madigan added that both companies made billions with the student loans. The major issue with their loan programs was that it had very high interest rates which were given to students in sub-quality schools.
According to the New York Times, the lawsuits revealed routine mistakes that eventually led to systematic failures. It was claimed that Navient mishandled loan payments, hid critical information in fine print and made it difficult for borrowers to release co-signers from their loans.
BuzzFeed News noted that one of the most serious claims against Navient is that it "systematically pushed" borrowers away from income-based repayment loans. Instead, it encouraged borrowers to go for forbearance, which saved Navient time and paperwork but resulted to more money being paid in interest by the consumers.
Forbes added that Navient has denied the CFPB's accusations. The company said that it "improperly seeks to impose penalties" based on new servicing standards which were applied retroactively.
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