Navient deceived borrowers and co-signers of student loans in latest legal setback for the company

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In a major decision yesterday, a Washington state court found that Navient, one of the nation’s largest student loan managers,

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deceived dozens of borrowers and co-signers of student loans.

The lawsuit, brought by Washington Attorney General Bob Ferguson, alleged that Navient engaged in numerous practices that deceived and harmed student loan borrowers. Among these were actions relating to the so-called “co-signer communiques”.

While federal student loans typically don’t require (or even authorize) a co-signer, private student loans often do. Since many student loan borrowers do not have a sufficient credit history when they apply for a student loan, a private lender may ask a co-signer to justify granting the loan.

Ferguson’s lawsuit against Navient alleged the company misled borrowers and student loan co-signers about their ability to release the co-signer on a loan at a later date if certain criteria were met – such as making on-time payments for periods of time. consecutive months over the years.

Navient reportedly made seemingly arbitrary decisions to prevent co-signers from being released on co-signed student loans. For example, co-signers and borrowers who paid their student loan bills in advance, or who paid multiple student loan bills in advance with a lump sum payment, have been denied assistance. A borrower with a monthly student loan bill of $ 100 and who paid $ 300 to pay multiple bills in advance would effectively be penalized, for example.

Judge Veronica Alicea-Galván ruled on Friday that Navient’s conduct regarding the co-signer’s releases was unfair or misleading, and allowed Ferguson’s motion for summary judgment. Other allegations against Navient in Ferguson’s lawsuit will be tried.

Navient denied any wrongdoing and expressed disappointment with the court’s decision.

“I will protect student borrowers from lenders who cheat Washingtonians,” Ferguson said in a statement. “Too many student loan borrowers in Washington are struggling to stay afloat. We will continue to hold to account Navient’s illegal conduct and student loan relief for thousands of Washingtonians who have been treated unfairly.

This is just the latest development in Navient’s ongoing legal issues. A long trial against the company brought by the Consumer Financial Protection Bureau (CFPB) in 2017 is pending. The CFPB alleged in its lawsuit that Navient’s practices left to be desired student borrowers “at every stage of repayment” and that the company “had not fulfilled its essential functions”. Navient installed a lawsuit filed last year against the company, alleging unfair and deceptive service practices for borrowers seeking a public service loan pardon. Navient did not admit any wrongdoing under the settlement.

Last month, a federal administrative law judge ruled that Navient owes the government more than $ 22 million for allegedly overcharging the Department of Education for student loan grants. And the student borrowers tried to force Navient into involuntary bankruptcy for allegedly charging borrowers for student loans that had already been paid. A judge last week dismissed the action, which Navient said was frivolous.

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