ABI Analysis: The $1.7 Billion Student Loan Deal that Was Too Good to Be True
ABI Analysis: The $1.7 Billion Student Loan Deal that Was Too Good to Be True, because hundreds of thousands of borrowers still have to pay back the predatory, high interest rate, educational loans:
Even though prosecutors said Navient had made predatory loans to hundreds of thousands of borrowers it knew couldn’t afford them, the $1.7 billion settlement the lender made last month with 39 states covered only about 66,000 who were in default. Those who managed to make the payments on their deceptive, high-interest debt — mostly to attend for-profit schools that left them with worthless degrees — would just have to keep paying, the New York Times reported. The settlement resolved nearly a decade of state investigations into the role Navient, the lender and loan-servicer that has long been a linchpin of the educational lending market, played in a bleak cycle of vulnerable students, dubious for-profit schools and taxpayer money. State prosecutors said that Navient, which did business as Sallie Mae until 2014, was willing to give private loans to borrowers it knew couldn’t pay them back because they were a money-losing lure for a far more profitable product: federal student loans. Starting in the early 2000s, Navient and the schools it worked with used the private loans to fill gaps for students who relied on government-backed loans from Navient to pay the bulk of their tuition. Even if the private loans weren’t repaid, the federally guaranteed loans were bulletproof revenue for Navient — and the more borrowers it attracted, the more money it made. One internal Navient email cited in court documents described the private loans as a “baited hook” to reel in more government-backed loans. [reported on 021722]