Mississippi Attorney General Jim Hood takes on lender for student loans he says were “designed to fail”

A Mississippi graduate says she’s paid $46,800 on her $46,000 in student loans over a 13-year-period, but still owes $40,000 due to interest costs.

Photo by Aaron Hawkins (Creative Commons).

Mississippi Attorney General Jim Hood announced a lawsuit Tuesday against Navient Corporation – formerly known as Sallie Mae – and Sallie Mae Bank, alleging nearly two decades of abuses against borrowers in its student loan business, saying that “the result of Navient’s conduct is a generation of Mississippi youth suffering under the crushing burden of a mountain of unnecessarily high student loan debt.”

Hood says Navient’s predatory practices include targeting low-income borrowers with high-risk, high-interest, private subprime loans without disclosing to borrowers the high likelihood of default. The lawsuit alleges that Navient pushed these loans in order to gain access to high profit federal and private loans, shifting part of the risk to schools through contracts.

“These predatory practices not only harm and burden the State’s rising generation before their careers have even started, they also harm and burden the entire state, which will be negatively impacted by the injury to this important and substantial part of its citizenry,” the lawsuit reads.

In addition, Hood says, Navient failed to service its borrowers and engaged in practices that caused borrowers seeking repayment relief to go even further into debt.

Rather than offering borrowers struggling with repayment suitable options like income-driven repayment plans, the lawsuit alleges, Navient pushed employees to quickly get off the phone with borrowers by steering them to the most expensive option – a forbearance plan. This cost borrowers millions more in added interest, while Navient profited and borrowers went deeper into debt.

One Mississippi student loan borrower in the lawsuit said that after qualifying for income reduction plan, Navient said the borrower’s payments would be $460 a month. Instead, the borrower was hit with $960 per month, and customer service representatives were unhelpful at rectifying the issue.

“I’ve had to put off medical treatment, because I’m struggling to get a foothold with these vampires,” the borrower said.

Hood said Navient’s practices have adversely impacted the entire state of Mississippi – which has the fourth highest student loan default rate in the nation.

“Navient’s conduct is estimated to have added $4 billion to the national student loan debt,” said Hood. “Students are the future of our state, and the presence of companies in Mississippi that knowingly take advantage of students who need the money to continue their education will not be allowed under my watch.”

Mississippi Center for Justice Consumer Protection Division Director Charles Lee and Advocacy Director Beth Orlansky joins Attorney General Jim Hood in announcing the launch of a lawsuit against student loan lenders. Photo via the Office of the Mississippi Secretary of State.

Hood was joined at a press conference by members of the Mississippi Center for Justice, who told the story of one Mississippi graduate who says she paid $300 a month to Navient for 13 years – or $46,800 — on her $46,000 in student loans, but has seen her balance decrease by only $6,000. But Navient disputes the borrower’s existence, claiming they checked their records going back to 2010 and could not find the borrower cited in the press conference, according to the Clarion-Ledger.

“Sixty percent of Mississippi student loan borrowers are in debt due to student loans, and this debt is crippling to those who are trying to be financially independent,” said Mississippi Center for Justice Consumer Protection Director Charles O. Lee. “Having their loan servicer increase the difficulty of repayment is unconscionable.”

The Mississippi Center for Justice encourages borrowers in Mississippi who got a loan through Navient or Sallie Mae to use the form at this link to report abuses.

In under a decade, national student loan debt has more than tripled, from $450 billion to $1.4 trillion, eclipsing credit card debt.