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Navient, the punching bag for student loans

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Navient, the punching bag for student loans

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Navient’s offices in Wilmington, Del.


Photo:

ANDREW KELLY/REUTERS

The Democratic takeover of student loans in 2010 was one of the great political fiascos of the time. But politicians can never admit it, so instead they kick Navient, the student loan service.

Navient, formerly Sallie Mae, agreed on Thursday to settle 39 lawsuits from state attorneys general by writing off $1.7 billion in outstanding debt. It will also make payments of $260 to 350,000 federal borrowers who were allegedly wrongfully placed in long-term forbearance.

State attorneys general have charged Navient with ‘predatory lending’ for providing private loans to low-income borrowers who attended for-profit schools and charging higher interest rates because of their riskiness higher credit. God forbids a private lender, unlike the federal government, from trying to avoid losing money.

Low-income students couldn’t afford tuition on federal aid alone, so Navient filled the void. For-profit businesses must also derive at least 10% of their revenue from sources other than federal assistance. Navient therefore indirectly helped these schools stay in business and compete with community colleges. This is another political sin of Navient.

Navient stopped issuing loans to students from for-profit schools in 2010. But it continued to handle government loans. AGs have complained that they are not doing enough to promote loan forgiveness plans that allow borrowers to pay 10% of their income for 10 to 20 years and then pay off the balance.

The AGs accused Navient of wrongfully placing borrowers on forbearance, which allows them to defer payments while continuing to accrue interest. Borrowers enrolled in loan forgiveness plans also accrue interest because they often don’t pay enough to reduce their balance. It’s a major reason the federal student loan toll has doubled over the past decade to $1.6 trillion.

Navient denies wrongdoing and continues to fight similar lawsuits filed by Obama’s Office of Consumer Financial Protection Director Richard Cordray in early 2017. But he says settling the AG lawsuit was cheaper than continuing to fight. In September, he also sought to terminate his government service contract because it was more of a hassle than it was worth.

But understand this—Mr. Cordray, now chief operating officer of the Department of Education’s federal office of student aid, asked Navient to renew the contract through 2023. Democrats must keep a punching bag as the debacle of government student loans grows.

Journal editorial report: The best and worst of the week from Kim Strassel, William McGurn and Kyle Peterson. Images: AP/Getty Images Composition: Mark Kelly

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Appeared in the print edition of January 15, 2022.

Navient, the punching bag for student loans

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