Student loan firm Navient accused of deceptive practices
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Navient shares sank more than 10 percent in trading Tuesday after a government audit revealed the prominent student loan servicing company may have deceived some borrowers into more costly repayment plans.
Conducted in 2017 by the U.S. Department of Education, the audit uncovered evidence that Navient representatives allowed borrowers to enroll in payment plans without disclosing other options that were less expensive. The Associated Press, which exclusively obtained a copy of the audit, said tens of thousands of customers may have faced higher costs as a result of Navient’s practices.
"This finding is both tragic and infuriating, and the findings appear to validate the allegations that Navient boosted its profits by unfairly steering student borrowers into forbearance when that was often the worst financial option for them," Sen. Elizabeth Warren, D-Massachusetts, said in a letter to Navient last week.
The audit’s findings were revealed as Navient contends with pending lawsuits from five states – Pennsylvania, California, Mississippi, Illinois and Washington – as well as the Consumer Financial Protection Bureau related to its servicing of student loan accounts. The Consumer Financial Protection Bureau contends that Navient’s failure to properly inform borrowers of cheaper payment options added nearly $4 billion in interest to their debts.
Navient has denied any wrongdoing, and a company representative told AP that the audit’s findings support the company’s claims that it has complied with legal standards.
"This [audit], when viewed as a whole, as well as dozens of other audits and reviews, show that Navient overwhelmingly performs in accordance with program rules while consistently helping borrowers choose the right options for their circumstances," the company spokesperson said.
Late Tuesday, Warren blasted the company’s response in a tweet, demanding that Navient’s CEO John Remondi be “held accountable.”