Home > Uncategorized > Student Loans Redux: Navient Shareholders Profit; Borrowers AND the Economy Suffer; USDOE Ignores

Student Loans Redux: Navient Shareholders Profit; Borrowers AND the Economy Suffer; USDOE Ignores

November 21, 2018

Our local newspaper featured an article by AP Business writer Ken Sweet that described the findings of a 2017 audit of private loan provider Navient performed by the USDOE, an audit that appears

…to support federal and state lawsuits that accuse Navient of boosting its profits by steering some borrowers into the high-cost plans without discussing options that would have been less costly in the long run.

While this sounds innocuous, as Mr. Sweet explains, it likely added millions in interest charges to student borrowers, money that might otherwise have been used to make purchases that would fuel the economy and enable student borrowers to move out of relative poverty into middle class status. These two paragraphs explain the financial and political ramifications of Navient’s behavior:

A 2017 study by the Government Accountability Office estimates that a typical borrower of a $30,000 student loan who places their loan into forbearance for three years — the maximum allowed for economic- hardship forbearance — would pay an additional $6,742 in interest on that loan.

“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,” (Senator Elizabeth) Warren said in a letter to Navient last week.

However the USDOE, who launched the audit and presumably is supporting student borrowers, is doing nothing about this. Why? Because the USDOE agrees with Navenit’s defense that “…its contract with the education department doesn’t require its customer service representatives to mention all options available to the borrower.” And what compounds the USDOE’s concurrence is that it has no intention of re-working its agreement, a decision that led to one of USDOE’s officials to resign in protest:

Seth Frotman, who was the highest- ranking government official in charge of student loans until he quit in August in protest over how the Trump-controlled Department of Education and Consumer Financial Protection Bureau were handling the issue of student loans, said Navient’s response was outrageous.

“In short, Navient, when confronted with evidence of its bad practices, is telling the government, ‘Pay us more money or take a hike.’ And it looks like the Department of Education took a hike,” Frotman said.

And the losers in all of this are the piled borrowers and the US economy.

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