One of the hardest lessons some students pursuing higher education learn comes at great personal expense: crushing debt, currently at $1.4 trillion nationwide and increasing. Some portion of the problem lies squarely with bad actors in the student loan arena.
The Consumer Financial Protection Bureau has set its sights on loan servicer Navient, suing the company back in January for not fully informing borrowers of certain rights when repaying student debt.
The work of the bureau, created under the 2010 financial reform laws, has become more urgent with the change in administrations. Last month, the Justice Department argued in court against the bureau’s structure as unconstitutional and advocated for change. President Trump wants to dismantle Dodd-Frank, the law that created the bureau.
For now, the bureau is continuing its mission. Notably, it has been joined by the attorneys general of Illinois and Washington in lawsuits accusing Sallie Mae of engaging in predatory lending. Navient, spun off from Sallie Mae in 2014, took most of Sallie Mae’s loans.
A New York Times article printed in The Buffalo News told how Ashley Hardin, who wanted to be a professional photographer, enrolled in the Brooks Institute of Photography and borrowed more than $150,000. Several broken dreams later, the 33-year-old waitress in Seattle pays $1,395 a month to Navient. With accumulated interest, she still owes nearly $150,000.
The lawsuits charge that Sallie Mae engaged in predatory lending, offering billions of dollars in risky private loans to students who shouldn’t have gotten them. The loans were designed to fail, according to the Washington State Attorney General’s Office.
The state lawsuits detail how Sallie Mae extended subprime loans to students with bad credit to attend schools with high dropout rates. According to the lawsuits, Sallie Mae knew the loans would fail, but considered it a cost of doing business as a way to build relationships with colleges and universities across the country.
That gave Sallie Mae a foothold in securing lucrative federal student loans. If a borrower defaulted on a federal loan, the government would reimburse the lender for most of its losses.
The attorneys general in Illinois and Washington are backed by their counterparts in 27 other states, according to the Times, who participated in a three-year investigation of student lending abuses. They want those private loans forgiven. It would help people like Hardin lift a destructive and unfair financial burden.