The Democratic Party’s takeover of student loans in 2010 was one of the great policy failures of the time. But politicians can never admit it, so instead they are kicking Navient, the company that provides student loans.
Navient, formerly Sallie Mae, on Thursday agreed to settle 39 state Attorney General lawsuits by canceling $1.7 billion in unpaid debt. It will also make $260 payments to 350,000 federal student loan borrowers who have been accused of being wrongly placed in long-term banning mode.
State AGs accuse Navient of “predatory lending” to privately lend to lower-income borrowers who attend for-profit schools and charge higher interest rates due to credit risk higher. Heaven forbids private lenders, unlike federal, from trying to avoid losing money.
Lower-income students can’t pay tuition with federal aid alone, so Navient fills the gap. For profits must also derive at least 10% of their revenue from sources other than federal aid. So Navient has indirectly helped those schools stay in business — and compete with community colleges. It was another Navient political sin.
Navient stopped for-profit school student loans in 2010. But it continues to provide government loans. AGs have complained they haven’t done enough to push for forgiveness plans that allow borrowers to pay 10 percent of their income over 10 to 20 years and then release the balance.
AGs have accused Navient of putting borrowers in the wrong ring, which allowed them to delay payments while continuing to accrue interest. Borrowers participating in the forgiveness program also incur interest because they often don’t pay enough to reduce their balance. This is a big reason the federal student loan balance sheet has doubled over the past decade to $1.6 trillion.
Navient denies wrongdoing and continues to fight similar legal allegations filed by Obama Consumer Financial Protection Bureau Director Richard Cordray in early 2017. But it says it settles the cases. suing AG is less expensive than continuing to fight. In September, it also sought to end a government service contract because it was more complicated than it was worth.
But understanding this — Mr. Cordray, now executive director of the Department of Education’s Federal Student Aid office, has asked Navient to extend its contract through 2023. Democrats need to keep a punching bag when the status goes. Government student loans are on the rise.
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Appears in print January 15, 2022.
https://www.wsj.com/articles/navient-the-student-loan-punching-bag-richard-cordray-11642199900 Navient, Student punching bag