Aarthi Swaminathan Finance Writer,Yahoo Finance•January 29, 2020
It’s not just American student loan borrowers who owe money to the federal government. It’s a top loan servicer, too.
Navient, one of the biggest U.S. student loan lenders, has owed the federal government $22.3 million for over a decade and still hasn’t paid it back.
In a letter to Education Secretary Betsy DeVos, shared exclusively with Yahoo Finance, Senator Elizabeth Warren (D-MA) urged her to make haste on collecting that amount from Navient.
“After massively overcharging the federal government in a years-long scandal … Navient has inexplicably continued to escape accountability for bilking taxpayers for years and still has not repaid this money,” wrote Warren. “Further delays or excuses are unacceptable: it is time for you to hold Navient accountable and finally collect the $22.3 million the company owes to taxpayers.”
Elizabeth Warren speaks at a rally in Brooklyn, New York in January 2020.
(Photo credit: Joel Sheakoski / Barcroft Media via Getty Images)
‘This matter now sits on your desk’
Navient’s payment is more than a decade overdue.
In 2009, an investigation by the Education Department found that Navient, then known as Sallie Mae, had overcharged the federal government by $22.3 million by abusing a program meant for smaller lenders.
The company had improperly claimed special allowance payments on loans that were not meant for them (i.e. overbilling the federal government) and was asked by ED’s Office of the Inspector General (OIG) to return the money to the department.
ED’s Federal Student Aid office issued a final determination in 2013, when it also demanded Navient pay back that amount, but Navient never paid.
Warren wrote a similar letter to the Obama administration in 2016, leading nowhere. And since taking helm of the Education Department under President Trump, DeVos has been criticized for being too close to loan servicers like Navient and being too lax on regulation with student loan policies, including limiting the CFPB’s access to information on student loans and amending the borrower defense rule to make it more difficult to seek relief.
Warren urged DeVos to act in the interest of the American taxpayer.
“This matter now sits on your desk waiting for you to act… you have a responsibility to the American people to ensure the company pays back the money it improperly collected,” she stated. “Letting Navient off the hook for its debts, particularly as you relentlessly hound defrauded student borrowers, would be a blatant demonstration of your willingness to side with loan companies that fail students and taxpayers over students and taxpayers …
I urge you to take action to finally end this saga and collect the $22.3 million that Navient owes the American people.”
Yahoo Finance has reached out the Department of Education and Navient for comment and has yet to receive a response.
Secretary of Education Betsy DeVos delivers remarks about administration efforts to increase school safety at The National Parent-Teacher Association Legislative Conference in Arlington, VA, March 13, 2018. (Photo: REUTERS/Aaron P. Bernstein)
Navient remains defiant
Regarding Navient’s debts to the federal government, the company’s president and CEO Jack Remondi previously reached out to DeVos and appealed for her to ignore Warren’s previous letter, which asserted the same fact.
In the “fact-check” portion of his letter, he stated that the $22.3 million outstanding fee was “[f]alse and misleading.”
He added: “This matter is unrelated to servicing and deals with a subsidiary financing issued in 1993 and retired more than 10 years ago. These practices were consistent with ED guidance and regulations. The company continues to stand behind those billing practices as proper ... Navient has been following the permitted appeals process and awaits a final determination.”
In its most recent 10-Q filing with the Securities and Exchange Commission, the company acknowledged the OIG audit but added that it has appealed the judge’s decision to the Secretary, adding: “We continue to believe that our SAP billing practices were proper ... The Company established a reserve for this matter in 2014 and does not believe, at this time, that an adverse ruling would have a material effect on the Company as a whole.”
KIEV, UKRAINE - 2019/01/07: In this photo illustration, the Navient Corporation
logo seen displayed on a smartphone.
(Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)
Navient allegedly steered borrowers into forbearance
This isn’t the first time Navient has come under fire.
Navient was also sued in 2017 by the Consumer Financial Protection Bureau, a federal agency Warren helped create, over allegations that it systematically encouraged student loan borrowers into forbearance and failed customers “at every stage of repayment.”
In a batch of court documents that were unsealed last year, it was revealed:
“Our battle cry remains ‘forbear them, forbear them, make them relinquish the ball,’” a Navient executive stated in the 2010 memo. “Said another way, we are very liberal with the use of forbearance once it is determined that a borrower cannot pay cash or utilize other entitlement programs.”
That case is still ongoing.
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Aarthi is a writer for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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