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
Other allegations against Sallie Mae and Navient include:
- Sallie Mae attempted to hide illegal banking practices during the split
- 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
- 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
- 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
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.