The state of California is charging Navient Corporation, formerly known as Sallie Mae, with alleged misconduct, including unfair competition and false advertising, regarding student loan servicing. The company services an estimated 1.5 million federal and private student loans in California.

According to the Los Angeles Times, California Attorney General Xavier Becerra alleges Navient did not fully explain how students could recalibrate their loan payments based on income. He also states the company misconstrued the balance due for borrowers who were late with payments. These behaviors, Becerra alleges, helped further the student loan crisis in the United States.

Student debt crisis growing

Many students across the country are struggling with large student loan debts. Estimates show that Americans owe about $1.5 trillion in student loan debt.

Two Navient subsidiaries, Pioneer and General Revenue Corp, also face charges. The state’s case charges these companies with misrepresenting information about rehabilitating defaulted loans and providing false information about collection fees for these rehabilitated loans.

Company denies wrongdoing

Navient denies the charges and places the blame on higher education systems and the federal student loan program. The CEO of the company further states the company does not provide financial advice to students or their families.

Other states filing suits

Other states are moving forward with suits against student loan companies because they do not believe the federal government is doing enough about the student loan crisis. Navient is also facing lawsuits regarding student loans in Washington, Pennsylvania and Illinois.

Attorney General Becerra recently reached a settlement with Balboa Student Loan Trust which halted all debt collection for nearly 35,000 California students. Last year, he settled with Aequitas Capital Management, which helped about 13,000 California students struggling with debt.

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