ICYMI: Warren Celebrates Landmark CFPB Settlement, Slams Loan Servicer Navient for Continued Predatory Practices
Warren: “Republican extremists want to return to the days where borrowers were just at the mercy of predatory servicers like Navient. The Biden-Harris Administration has a different vision.”
Senator Warren launched an investigation this year into Navient’s failures to cancel its private student loans pushed onto students attending fraudulent for-profit schools
Washington, D.C.- At a subcommittee hearing of the Senate Committee on Banking, Housing, and Urban Affairs, Senator Elizabeth Warren (D-Mass.) celebrated last week’s landmark CFPB settlement with Navient, which delivered $100 million in relief to borrowers and permanently blocked Navient from the federal student loan system, and discussed Navient’s continued mistreatment of student loan borrowers with private loans, calling on the servicer to cancel loans held by borrowers who attended predatory for-profit institutions.
In the hearing, Senator Warren revealed newly obtained data from her oversight of Navient’s cancellation process for borrowers with private student loans who attended predatory for-profit institutions. To date, Navient has sent applications to approximately 4,000 borrowers, even though at least 65,000 of its borrowers attended for-profit colleges. Of the 1,000 applications that Navient has processed so far, Navient has rejected over 800.
When asked to rate Navient’s cancellation process on a scale of 1 to 10, Ms. Aissa Canchola Bañez, Policy Director, Student Borrower Protection Center, gave Navient’s process a 0. Professor Dalié Jiménez, Professor of Law and Director, Student Loan Law Initiative, University of California, Irvine School of Law, confirmed that Navient was aware of its deception and is responsible for discharging its predatory private loans.
Transcript: Hearing on Back to School: Shedding Light on Risks and Harm in the Private Student Lending and Servicing Market
Senate Banking, Housing, and Urban Affairs Committee
September 17, 2024
Senator Elizabeth Warren: So for nearly a decade, I’ve led investigation after investigation into student loan servicer Navient for its appalling mistreatment of borrowers. In 2015, I called on the Department of Education to crack down on Navient for cheating military families. In 2017, I raised the alarm about Navient’s $155 million expansion into the private student loan market. In 2019, I urged the Department to fire Navient. And those are just the highlights. In 2021, in the first banking subcommittee I chaired, I questioned Navient's CEO about the servicer's failed record. Later that year, Navient finally left the federal student loan system, and I was proud to help deliver that long-overdue win for borrowers. But that was not the end of the road.
Ms. Canchola Bañez, you’re an expert on the student loan system; after Navient exited the student loan system, were borrowers free from Navient’s misconduct?
Ms. Aissa Canchola Bañez: Unfortunately, no Senator. And you are right, the ending of Navient’s federal contract was a win and would not have been possible without your fierce advocacy and fight on behalf of borrowers.
But unfortunately, Navient remained a player in the private student loan space and continues to do so to this day. In fact, today it manages private student loans for more than two and a half million borrowers.
Senator Warren: In the early 2000s, Navient, which was then known as Sallie Mae, conspired with fraudulent for-profit schools to push predatory private loans onto students who Navient knew were likely to default.
Thirty-nine state attorneys general later sued, and Navient agreed to cancel $1.7 billion of predatory loans. But there was a catch. The settlement only applied to borrowers who had already defaulted. So, Navient got away with spending only $50 million in relief, (having promised $1.7 billion) leaving tens of thousands of borrowers eating dirt.
This year, I launched an investigation into Navient’s failure to cancel the rest of these predatory private loans, and in response, Navient told me that it was, quote, “committed to addressing valid school misconduct claims.”
Ms. Canchola Bañez, you work with student loan borrowers every day. So I just want to ask—I’m gonna ask you to put this one together—on a scale of one to 10, how would you rate Navient's cancellation process for these predatory loans so far?
Ms. Canchola Bañez: I would rate it a zero, Senator.
Senator Warren: So wait, the scale was 1 to 10 here, you are going for 0 even so.
Ms. Canchola Bañez: I'm going 0—absolutely.
Senator Warren: Explain why.
Ms. Canchola Bañez: We’ve seen the Department of Education try to streamline these types of cases for misconduct and providing relief for borrowers with federal student loans.
Navient had the opportunity to create an automatic, accessible process to provide this relief for private student loan borrowers. Instead, it created a process that is incredibly complex and that every day borrowers struggle to access.
Senator Warren: So there’s the deal. They could have just canceled the way they promised. Would have been easy. But they make a lot more money if they make it really hard for people to cancel.
Now just last week, in response to my investigation, Navient provided data about its cancellation process for the first time. Navient told me that it sent applications to about 4,000 borrowers, even though at least 65,000 of its borrowers attended for-profit colleges. Even more shocking? Of the 1,000 applications that it has processed so far, Navient has rejected over 800.
In defending the predatory student loans it made, Navient’s CEO said, and I quote, “Private student loans...are made in good faith.”
Now Professor Jiménez, you’re an expert in consumer protection law. Is that a fair characterization of Navient’s record on private student lending?
Professor Dalié Jiménez: Not at all. Not at all, Senator. Navient knew that it was making loans to people who could not repay. Their CEO in 2007 is alleged to have said in court documents, that he said, quote, “If the borrower can create condensation on a mirror, they need to get a loan this year.”
They knew what they were doing. Navient now has the responsibility to discharge these loans and to do it as quickly as possible for the millions of students who are suffering.
Senator Warren: You know, Republican extremists want to return to the days where borrowers were just at the mercy of predatory servicers like Navient. The Biden-Harris Administration has a different vision.
Last week, after years of dogged work, the Consumer Financial Protection Bureau entered into a historic settlement with Navient, delivering $100 million of relief to cheated borrowers and permanently banning Navient from the federal student loan system.
It’s long past time for Navient to do the right thing by their countless defrauded borrowers and cancel out these loans for the private student loan borrowers as well.
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