Pennsylvania became the latest state to file a lawsuit against the nation’s largest student loan servicing company Thursday. Navient Corporation had previously tried to downplay a series of lawsuits filed by states and the federal government earlier this year, but Pennsylvania’s entry into the fray makes clear Navient’s legal troubles are unlikely to go away anytime soon. On Thursday, the company’s stock tumbled 14%.
“Navient’s deceptive practices and predatory conduct harmed student borrowers and put their own profits ahead of the interests of millions of families across our country who are struggling to repay student loans,” Pennsylvania Attorney General Josh Shapiro said in a statement. “The more businesses like Navient put their bottom line ahead of the interests of their customers and consumers, the more vigilant we will be to protect Pennsylvanians and hold businesses like Navient accountable for their misconduct.”
The latest lawsuit comes on the heels of an hour-long documentary by Fusion’s investigative team, The Naked Truth: Debt Trap, which examined who wins and who loses in the nation’s convoluted student loan system. In Debt Trap, we spoke to a Navient whistleblower about some of the allegations lodged against the company. Former Navient employee Lynn Sabulski alleged the company pressured its employees to drive callers into a short-term loan fix called a forbearance—a set-up that can come at a high cost in the long-term. If she didn’t do it, “I could be written up. I could lose my job,” Sabulski said.
Sabulski worked at a Navient call center in Wilkes Barre, Pennsylvania, where the company has its largest base of operations, making this latest lawsuit all the more significant. The suit charges that Navient was doing precisely what Sabulski alleged.
“The allegations are completely unfounded and the case was filed without any review of Pennsylvania residents’ customer accounts. We comply with the rules that govern the student loan program as set by Congress and the U.S. Department of Education, and there are no allegations that we have violated these rules,” Navient spokesperson Patricia Christel told Fusion Thursday in an email. “We will vigorously defend our record in court, and are confident we will prevail following an impartial review of the facts. In the meantime, we will continue to provide industry-leading service to our customers.”
As a company, Navient has built up considerable political muscle since 2014, when it broke off from the student loan issuer Sallie Mae. Navient has spent more than $10.1 million lobbying Congress since then, with $4.2 million of that spending just since 2016. At least $400,000 of that spending was specifically related to the Consumer Financial Protection Bureau, which filed the federal lawsuit against the company in January. The company’s lobbying operation has recently expanded at the state level as well, pushing back against proposed laws that seek to regulate servicers in lieu of stronger federal action.
Over $1.4 trillion in student loans is owed by Americans, making education loans the biggest chunk of U.S. consumer debt. Complaints about how student loan servicers manage this massive debt, and how they profit from those loans, have grown louder in recent years, both from borrowers and from politicians in Washington.
“Navient’s view is, hey, I’m just going to take this money from the Department of Education and maximize Navient’s profits, rather than serving the students,” Senator Elizabeth Warren told Fusion in Debt Trap. “I hold Navient responsible for that. But I also hold the Department of Education responsible for that. They act as our agent, the agent of the U.S. taxpayers, the agent of the people of the United States. And they should demand that.”
Both Washington state and Illinois sued Navient days before the inauguration of President Donald Trump, along with the federal government’s Consumer Financial Protection Bureau. “We’ve seen a dramatic increase in complaints from students and borrowers in our state to our office” Washington Attorney General Bob Ferguson told us in an interview in July. “I hope other states join us. There’s strength in numbers.”
The Naked Truth was initially able to confirm that nine states have active investigations into Navient’s business practices. Pennsylvania was not among those states, meaning the true scope of state-level investigations may be even greater.