Supporting States in the Fight to Protect Borrowers

By Benjamin Roesch | August 29, 2019

Today, a coalition of national and local non-profit organizations – including the Student Borrower Protection Center, the Center for Responsible Lending, SeniorLAW Center, the Lawyers’ Committee for Civil Rights Under Law, New Jersey Citizen’s Action, and Community Legal Services of Philadelphia – joined together in filing an amicus curie brief in support of the Pennsylvania Attorney General’s Office versus large student loan servicing company Navient.

The Pennsylvania Attorney General’s Office filed a lawsuit against Navient in October 2018, alleging that Navient steered financially distressed borrowers into disadvantageous forbearances instead of better options like income-driven repayment plans. Federal District Court Judge Robert Mariani denied Navient’s attempt to dismiss the case, but Navient has appealed to the Third Circuit, arguing that the Pennsylvania AGO’s state Consumer Protection Law claims were preempted by the Higher Education Act. Navient has claimed to be above the law, but the court ruled that not to be the case. The company’s preemption argument has now been rejected in cases brought by the California, Illinois, Mississippi, and Washington AGOs. Now we are working to support the Pennsylvania AGO to hold Navient accountable for its harmful practices. Financial companies must abide by federal and state consumer protection laws.

The brief emphasizes the importance of state consumer protection remedies because servicer misconduct – and the financial havoc it wreaks – falls disproportionately on vulnerable and disadvantaged populations. For example, older student loan borrowers often face declining incomes and have less access to technology, while normal cognitive changes during the aging process may interfere with financial decision-making and leave them more vulnerable to servicer misrepresentations. 

Meanwhile, historic discriminatory policies have prevented minority communities from building familial wealth, and as a result, students of color borrow more than white students to finance their educations. Unfortunately, the data show that ongoing discrimination in the job market and workplace mean that borrowers of color earn less than their white peers. These barriers cause borrowers of color to struggle with student loan repayment at higher rates, and servicer misrepresentations like Navient’s alleged forbearance steering practices increase the cost of the loan and the length of repayment.  The result is harm to individual borrowers and a perpetuation of unjust socioeconomic disparities that cause students of color to borrow more in the first place. 

State attorneys general are playing a critical role in addressing America’s $1.5 trillion student loan crisis. Today’s brief aims to support states in their fight to protect borrowers.

Our amicus brief can be found here.

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Benjamin Roesch is an SBPC fellow who is an expert on consumer finance and insurance issues.