Student
loan giant Navient Corp. told
the Securities and Exchange Commission (SEC) yesterday that the Consumer
Financial Protection Bureau (CFPB) sent it a letter claiming it has the legal
grounds for a lawsuit.
Navient
is accused of overcharging borrowers and violating their rights.
The
CFPB has been working with the Department of Justice, the New York Department
of Financial Services, and state attorneys general to investigate the shadier
aspects of higher education.
For
a company that depends on the government for profit, Navient acts like an urban
street vendor. They already were in trouble with the FDIC for conning borrowers
into paying late fees and had to pay out $78 million to settle the issue.
Yet
they continued to engage in shady practices designed to collect more money from
struggling borrowers. With $1.2 trillion in outstanding student debt they can
collect, you could admire the initiative to make more money.
The
Department of Education (DOE) has promised to better oversee Navient.
"We continue to work closely with CFPB and other federal
agencies to protect student loan borrowers," said Dorie Nolt, a DOE spokeswoman.
"We’ve made a variety of changes to improve loan servicing, and we’re
constantly monitoring our servicers. We won’t hesitate to take action against a
servicer that isn’t following the law."
What’s Navient?
While
banks do loan money to students, the DOE is the best place to go for a good interest
rate. But you don’t pay them back. You pay back Navient.
Sallie
Mae, an organization the government created to handle student loans, was privatized,
like the venerable Fannie Mae and Freddie Mac. To make more money, Sallie Mae spun
off its student loan arm and called it Navient, which isn’t
BBB accredited.
How did the student loan situation get
so bad?
When
the only way to get a good job short of breaking bad is to go to
college, the price went up astronomically from the days when working as a
bartender in the summer could pay it.
The Great Recession exacerbated the problem. Since many
states can’t legally run a deficit to boost their economies, they cut
higher education, causing tuition to soar. Thus, many student took out loans to
make up the difference.
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One of the most expensive yet least
fashionable hats
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What’s being done about student loans
and Navient?
Many
agree it’s terrible to saddle Millennials with thousands of dollars of debt at
the beginning of their lives. It prevents them from buying houses and starting families.
President
Obama has tried to address the issue. In fact, part
of the Obamacare bill was language that helped student borrowers.
Student
debt is hard to fight politically since there’s no student borrower union or
student bar where people are commiserating and can be galvanized into protest. Since
they’re struggling for money they can’t really donate to lobby politicians or
hire a lobbyist. You also have the free rider problem where people can point to
a few groups, say they’re working on it, and go back to their lives.
Thus,
borrowers trying to make ends meet suck it up, pay what they can, and keep going.
That’s what the oppressed do. When the world looks dark, they focus on their
own path and try to make the best of it.
With
the CFPB is working on the issue, there’s hope for improvement.
