PLAYING THE GAME
The name to know is Navient – another shark swimming in the infested waters of student loan debt and robbing them of their futures. Navient is another shark working with the others – the Federal Government, the banks and the colleges – to make repayment of loans easier…or so we are told.
Navient is the nation’s largest servicer of student loans. It doesn’t make the loans but it and a number of other such companies are paid $600 million dollars a year to service private and Federal loans – Navient for some 12 million people – approximately one in four student loan borrowers.
Navient is paid by the government to manage these accounts, process monthly payments, collect payments each month on behalf of banks, government and other lenders and enroll distressed borrowers in alternative repayment plan.
It is telling that approximately one in four debtors are now in default…not repaying their debt but still obligated to do so…captured by the reality that unlike any other loan, student loan debt can never be discharged by bankruptcy.
In law suits filed recently by the Consumer Financial Protection Bureau, established by the Dodd, Frank joint committee to regulate the banking industry after the 2008 financial crisis, and by State Attorneys-General in Illinois and Washington State, Navient is being charged with failing consumers at every level from routine mistakes and lapses in oversight that over time added up to systemic failures.
According to the suits, Navient mishandled loan payments, buried critical information in fine print, and set obstacles for borrowers trying to release cosigners from their loan obligations.
A 2015 CFPB report -coming from 30,000 public complaints filed with the agency from May to July of that year – indicated that services were pushing students toward default on their loans by giving them false, inaccurate information, by making it difficult for them to refinance at lower rates and by withholding valuable information about affordable payment plans that are in the struggling borrower’s best interest.
The report made clear that students in debt could have benefited from income-driven repayment plans that were intended to ease pressure of debt payments to keep them from defaulting. The plans allow borrowers with low income and high debt to pay less each month – or nothing – without being penalized or defaulting. Yet Navient and others never told students of these plans.
In some cases, servicers chose to apply a larger portion of student debt to a low interest loan, deliberately leaving higher interest loans with a larger balance.
Almost two years later, the CFPB has turned to a law suit to stop servicers from continuing these practices.
They were the national mortgage lenders who worked closely with the big and little banks and realtors to launch the first big scam of the 21st Century: the real estate game in which all three colluded to ‘help’ home-buyers purchase homes they couldn’t afford.
This deal included the bundling of worthless mortgage paper to be sold from bank to bank and then overseas eventually leading to a financial crisis in 2008 that almost brought down the financial industry and maybe, the country. And yet nobody went to jail because no laws were broken. Scams work that way…staying just on the right side of the law.
Today we are living with another systemic ‘scam’ called student loans. Eerily familiar to the real estate debacle, this one is mega-sized: 44 million people involved, in a debt amounting to 1.4 trillion dollars.
Reform Student Debt, Inc. is the national organization established to repeal the Federal laws leading to what it says is ‘the most outrageous, prohibitive, punitive, one-sided financial arrangement ever seen in this country.’ It calls the collusion of lenders, the Federal Government and the colleges ‘loan sharks’ claiming they are ‘feeding on the future’ of all those in debt.
On its website, Reform Student Debt.org outlines the history of the punitive student loan laws passed by Congress and signed by Presidents since the late 1970’s. The ‘loan sharks’ see student loans as profit centers …opportunities to make significant money rather than to help people achieve advanced learning…the very purpose of the loans to begin with. In the words of skilled financiers, debt is big business.
It is no accident that upon leaving his service as Secretary of the Treasury and returning to Goldman, Sachs, the leading investment bank, Robert Rubin asked President Bill Clinton for two favors: to end Glass Steagell, the 50 year old law that kept commercial and investment banks separate, and to insure that student loans would be free of usury law regulations, garnishment barriers and bankruptcy protection. He got what he asked for. We got the banking disaster of 2008 and student loan debt beyond comprehension.
All consumer protections have been removed from these loans; interest rates have no ceilings and no usury laws exist as banks set the rates they desire; late fees or renegotiated loans carry whatever rates the banks choose; garnishment for unpaid loans can be as much as half a salary and there is absolutely no way to escape payment through bankruptcy.
10 million people – one-quarter of those in debt – are in default but cannot escape their debt.
Despite the fact that many of those who borrow money from the Federal Government may be excused of their debt after 25 years…
More than 2.8 million Americans over the age of 60 still owe student debt…in 2005 only 700,000 were still in debt at that age.
But here is where the scam cuts closest: In 2014 the Justice Department and the Federal Deposit Insurance Corporation fined Navient for illegally overcharging military members. The company ignored the Servicemembers Civil Relief Act, a federal law that protects active duty personnel, requiring lenders to reduce interest rates on any loans to 6 percent.
One of Navient’s subsidiaries, Pioneer Credit Recovery, which was also named in the new law suits over student loans, previously collected on defaulted federal student debt, but the Education Department ended that arrangement two years ago because it said that Pioneer made “materially inaccurate representations” to borrowers.
Navient still holds a contract with that department to service federal student loans, which runs until 2019.
Fool me once. Fool me twice. Fool me over and over again. The contracts keep coming. Can there be any question that these activities add up to a very productive scam for the sharks and a very destructive scam for the millions of students involved.