Navient Claims It Doesn’t Have to Follow State Laws
WASHINGTON, D.C. – The Center for Responsible Lending (CRL), the Student Borrower Protection Center (SBPC), the Pennsylvania SeniorLAW Center, the Lawyers’ Committee for Civil Rights Under Law, New Jersey Citizen Action, and the Community Legal Services of Philadelphia filed an amicus brief today in the Third Circuit Court of Appeals in support of Pennsylvania Attorney General Josh Shapiro’s lawsuit against Navient Corporation, one of the nation’s largest student loan servicers.
The brief focused on the impact of improper student loan servicing practices on student borrowers, particularly seniors and borrowers of color, and argues that the Higher Education Act (HEA) does not broadly preempt state law regulation of federal student loan servicers based on misrepresentation claims. In the case, Commonwealth of Pennsylvania v. Navient Corporation et al., Shapiro alleges Navient violated Pennsylvania’s laws by steering borrowers towards costly repayment programs or into forbearance, which allows students to temporarily postpone repayment while interest continues to accrue.
According to the groups’ amicus brief:
The consequences of servicer misconduct fall disproportionately on members of vulnerable communities who are more likely to struggle with repayment, including older borrowers and borrowers of color. Older borrowers often face limited and declining income and less access to technology, which increases the likelihood that they are exposed to servicer misrepresentations. ... Borrowers of color are also more likely than their white peers to experience servicer misrepresentation. First, historical practices preventing inter-generational wealth-building mean that borrowers of color graduate with more student loan debt than their white counterparts. Second, the over-representation of students of color in the student bodies of predatory, for-profit schools and ongoing workplace discrimination mean that borrowers of color are more likely to struggle with repayment of those loans. Servicer misrepresentations increase the costs of those loans and erect another barrier to wealth building, perpetuating the cycle. The enforcement of traditional state consumer protection laws is critical to redress harm done to borrowers impacted by unlawful servicer conduct.
Since 2017, student loan servicers have been arguing novel and unsupported theories that the HEA should be read to bar such state law regulations, which would deprive student borrowers from protections when their loan is mishandled or servicers aren’t working in borrowers’ best interest.