If a student loan company Navient Solutions does not tell a borrower of all options available, is it contributing to the predatory schemes of another company that then takes advantage of that borrower? That’s what the complaint for this class action alleges in bringing suit against both Navient Solutions, formerly known as Sallie Mae, and Studebt, which ensnared plaintiff Shawn M. Davis in an outright fraudulent arrangement.
The class for this action is all persons who held FFELP loans with Navient Solutions from 2010 through the present.
Navient holds the largest portfolio of education loans insured or federally guaranteed under FFELP, the Federal Family Education Loan Program. FFELP loans were made by private lenders, such as Sallie Mae and Navient Solutions, but are guaranteed by the federal government.
Navient pools the FFELP loans in its portfolio into securitized trusts, then sells pieces of these loans to investors. These sales have become its greatest source of revenue. Navient Solutions services the FFELP loans, interacting with the borrowers.
Changes in the law in 2010 allowed student loan borrower to consolidate FFELP loans into a new loan with the Department of Education in an arrangement that, according to the complaint, would be profitable to every borrower. However, since the original loans would be paid off to facilitate the arrangement, this would result in a loss of revenue for Navient with the FFELP securities it was selling.
Plaintiff Shawn Davis had almost $42,000 in FFELP student loans. The complaint alleges that when he consulted Navient Solutions in 2014 about the best options for repaying this debt, the company purposely omitted the Department of Education consolidation option, intentionally misleading him so that Navient would not lose his loan and thereby lose money.
The complaint alleges that this purposeful omission opened the door for predatory consolidation companies such as Studebt, which around that time offered Davis a purported consolidation arrangement. Davis accepted Studebt’s arrangement, which the complaint alleges turned out to be completely fraudulent, secretly enrolling Davis into a forbearance program, taking all the payments he made for itself, paying nothing at all towards what he owed, and causing his debt to rise to over $45,000 by 2017.
The complaint alleges, among other things, that Navient breached its contract as well as its covenant of good faith, and that Studebt committed fraud and breach of fiduciary duty, and also violated the TCPA while marketing its fraudulent scheme.