Are You Being Overcharged on Your Navient or Sallie Mae Student Loans?

Are You Being Overcharged on Your Navient or Sallie Mae Student Loans?

Posted By Golomb & Honik, P.C. || 1-Aug-2016

You may be paying more on your student loan than you think to Sallie Mae and Navient. Sallie Mae, founded in 1973, entered a merger of sorts with Navient in 2014. Navient took over Sallie Mae’s federal loan servicing business, and now handles billing and servicing on millions of federal student loans. Sallie Mae offers private student loans which are later securitized, or broken up and sold to investors.

Both companies have publicly asserted that the interest on student loan debt is based on 365.25 days per year. Despite this claim, since 2013, the companies have apparently calculated interest on student loans somewhat differently—and definitely in their favor while charging higher interest than promised. This miscalculation has resulted in consumers who already struggle under the weight of student loans paying even more in their monthly payment than they legally owe in both interest and late fees.

Sallie Mae Accused of Cheating Student Loan Borrowers

Just last year, Sallie Mae and the federal government reached an agreement after the nation’s largest student loan lender was accused of cheating student loan borrowers. Sallie Mae was ordered to pay $3.3 million in fines, as well as to refund up to $30 million in late fees. The company was also ordered by the Consumer Financial Protection Bureau to pay $96.6 million in restitution and penalties for wrongly processing monthly student loan payments.

Other allegations against Sallie Mae and Navient include:

  • Sallie Mae attempted to hide illegal banking practices during the split to Navient.
  • Sallie Mae borrowed a whopping $8.5 billion at 0.23 percent interest from the Federal Home Loan Bank in Des Moines. The money was earmarked to originate new private student loans. The company ended up putting more than $2.5 billion in their pocket by loaning the money out to students at 25 to 40 times the interest rate they paid.
  • Although these student loans account for only 23 percent of their portfolio, Private Education loans account for almost 60 percent of the company’s net income from interest.
  • By refusing to assist student loan borrowers who are in financial trouble with other payment options, Sallie Mae actually saves millions in potential expenses.
  • By refusing to work with student loan borrowers, Sallie Mae stands to make even higher profits in the future since the debt cannot be discharged through bankruptcy.
  • A California class action lawsuit against Sallie Mae/Navient alleged the 5 percent late fee charged for each missed payment on a private student loan is equivalent to an annual interest rate of 120 percent.
  • In addition to the excessive late fees, Sallie Mae also charges borrowers “regular” interest on the missed payment amount, essentially resulting in the borrower paying twice for being late on a single student loan payment.
  • Allegations against Navient claimed the company violated state laws banning unfair or abusive practices. They did this by paying their call center workers based on how quickly those workers could get student loan borrowers off the phone.
  • Navient inappropriately steered desperate borrowers into plans which temporarily deferred payments, yet allowed loan balances to grow.
  • Navient even preyed on the most vulnerable borrowers. While severely disabled Americans with student loans are eligible to have that debt erased, Navient employees neglected to tell those borrowers about their rights.
  • Navient employees demanded payment from student loan borrowers who may have been eligible for student loan forgiveness programs if their school suddenly shut down or defrauded them.

Sallie Mae became a key player in 1995 in student loan securitization— “packaging” student loans. When the government put a halt to private lenders making student loans which were guaranteed by the government, Sallie Mae diversified into CDs, high-yield savings accounts, credit cards, insurance products and checking accounts. Even in instances where student loans were being paid late, Sallie Mae continued to bring in money through their own debt collecting businesses, Pioneer Credit Recovery and General Revenue Corporation.

Golomb & Honik, P.C. is investigating Sallie Mae and Navient for charging excessive amounts of interest, resulting in consumers paying more than they rightfully owe. While the difference might not be huge for one borrower, those differences could add up to millions in fraudulent profits for Navient and Sallie Mae.

If you think you have been overcharged interest on your student loan debt, we can help. To learn more about your legal options or to schedule a free consultation, call Golomb & Honik, P.C. today at (215) 278-4449. We represent clients in Pennsylvania and throughout the United States.

Categories: Consumer Protection
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