SR121

A Senate Resolution urging the Attorney General to take legal action against Navient Corporation and its subsidiaries for engaging in damaging and deceptive student loan practices.

Whereas, Student loans have allowed millions of Americans to invest in their future, however, rising student loan debt now threatens the financial futures that many hard-working Americans intended to secure; and

Whereas, Student loans are now the second largest source of consumer debt in the United States, with approximately $1.4 trillion in outstanding student loan debt; and

Whereas, New Jersey’s graduates experience this crisis first-hand, as the average four-year college graduate in 2015 left school with over $30,000 in student loan debt; and

Whereas, As a consequence of this rising debt, the United States Department of Education reported in September 2016 that roughly 11 percent of college graduates default on their student loans within three years of beginning to make payments; and

Whereas, While many factors contribute to this growing debt crisis, the predatory practices of some student loan companies, such as Navient Corporation (Navient) and its subsidiaries, have facilitated the rise of student loan debt by luring vulnerable borrowers into unsound investments; and

Whereas, Navient was established after a 2014 corporate restructuring of the student loan giant SLM Corporation (SLM), in which SLM retained the company’s student lending operations and newly-created Navient assumed control over SLM’s loan servicing and debt collection operations; and

Whereas, Pursuant to this restructuring, Navient also assumed responsibility for any liabilities incurred by SLM’s subsidiary Sallie Mae, which was one of the nation’s largest student loan lenders, for any business practices that predated the corporate split; and

Whereas, Navient is now one of the nation’s largest student loan companies, servicing more than 12 million customers and handling over $300 billion in educational loans; and

Whereas, It has been alleged that Navient and its subsidiaries, including Sallie Mae, violated various consumer protection laws, such as predatory sub-prime lending and deceptive loan servicing practices; and

Whereas, Most notably, Sallie Mae is alleged to have implemented a predatory sub-prime lending policy throughout the 2000s, wherein risky loans, many with expected defaults rates exceeding 70 percent, were extended to vulnerable student borrowers; and

Whereas, Sallie Mae used these sub-prime loans to gain favor from universities, primarily for-profit institutions, that welcomed the risky lending because it allowed them to advertise that a high percentage of their students received financial aid; and

Whereas, In turn, these universities recommended to their more profitable student borrowers that they take out loans from Sallie Mae; and

Whereas, While servicing student loans, Navient also allegedly misrepresented federal loan repayment options by deterring customers from income-based repayment plans, which are generally in a borrower’s financial interests, and steering borrowers into risky “forbearance” periods, notwithstanding the negative consequences of forbearance for borrowers, such as the accumulation of interest, the loss of long-term federal payment forgiveness, and the increased likelihood of loan default; and

Whereas, In addition, Navient is believed to have engaged in other damaging and deceptive loan servicing practices, such as failing to disclose recertification deadlines for income-based payment plans, misrepresenting the consequences of delayed income-based payment plan recertification, falsifying the requirements for co-signer release, and repeatedly misallocating and misapplying customer payments; and

Whereas, By luring borrowers into taking risky loans, steering them into financially detrimental repayment plans, and then lying about repayment policies, Navient’s practices inflicted years of undue financial hardship on countless consumers, many of whom are hard-working New Jerseyans; and

Whereas, In January 2017, the Attorneys General of Illinois and Washington State, as well as the Consumer Financial Protection Bureau, responded by filing separate lawsuits against Navient and its subsidiaries for violating state and federal consumer protection laws in connection to these allegations; and

Whereas, The individual and societal costs of Navient’s consumer protection violations require that New Jersey take a strong stand against the company to ensure that these violations do not happen again; now, therefore,

Be It Resolved by the Senate of the State of New Jersey:

1. This House respectfully urges the Attorney General to promptly follow other states in taking legal action against Navient Corporation and its subsidiaries for violating New Jersey’s consumer protection laws by engaging in damaging and deceptive student loan practices.

2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Secretary of the Senate to the Governor and the Attorney General.

STATEMENT

This resolution urges the Attorney General to follow other states in taking legal action against Navient Corporation and its subsidiaries for violating New Jersey’s consumer protection laws by engaging in damaging and deceptive student loan practices.

Over the past two decades, student loan debt has developed into a national concern that threatens the financial future of countless Americans. New Jersey graduates have been no exception to this growing crisis. While there have been many contributing factors, the predatory practices of student loan companies, such as Navient Corporation (Navient) and its subsidiaries, have undoubtedly facilitated the rise of student loan debt by luring vulnerable borrowers into unsound investments.

Recent evidence implicates Navient and its subsidiaries in wide-ranging consumer fraud violations, including predatory sub-prime lending, deceptive and self-serving loan servicing, and dishonest debt collection. In response, the Attorneys General of Illinois and Washington State, as well as the Consumer Financial Protection Bureau, each filed lawsuits against the corporation in January 2017.

Navient’s abusive business practices inflicted years of undue financial hardship on countless borrowers, many of whom are hard-working New Jerseyans. New Jersey must therefore take a strong stand against the company to ensure that these violations do not happen again.