Student loan management corporation Navient, formerly known as Sallie Mae, is being sued by California’s Attorney General Xavier Becerra.
According to the San Francisco Chronicle.
State Attorney General Xavier Becerra accused one of the nation’s largest student loan servicers of cheating perhaps thousands of California borrowers, and on Friday sued the company and its subsidiaries.
Becerra said the company’s practices violate the state’s unfair competition and false advertising laws.
The attorney general’s office was not able to say how many Navient borrowers are affected in California. The company services slightly more than 1 million federal and private student loans for California borrowers, and about 12 million across the country, totaling about $300 billion.
The company is also being sued by other three states — Illinois, Washington and Pennsylvania — and by the Consumer Financial Protection Bureau.
Navient’s president, Jack Remondi, issued a statement Thursday calling Becerra’s allegations unfounded. He called the lawsuit “another attempt to blame a single servicer for the failures of the higher education system and the federal student loan program to deliver desired outcomes.”
The company said it promotes plenty of repayment options, including those tied to the borrowers’ income level. In a fact sheet, the company said 53 percent of the federal student loans it services are in that program.
Natalia Abrams, a Navient borrower from California and a student debt activist who appeared with Becerra in Los Angeles to announce the allegations, called Navient “one of the most complained about companies out there.”
“No federal borrower should ever be in default,” Abrams said. “It’s the fault of the student loan services that they were not getting into the correct plans.”
The default rate on federal student loans was 11.5 percent in 2014, according to the most recent figures from the U.S. Department of Education.
Becerra invited Californians who believe they are victims of federal loan misconduct by Navient to report the problem at www.oag.ca.gov/report or call 800-952-5225.
Earlier this month, Becerra announced a settlement granting millions of dollars in student loan forgiveness and refunds to almost 35,000 California students who took out private loans to attend for-profit colleges Everest, Heald and WyoTech, run by the now-defunct Corithian Colleges Inc.