Sallie Mae said in a statement that Navient “has accepted responsibility for all costs, expenses, losses and remediation arising from this matter.”
Perhaps more than any other company, Sallie Mae is synonymous in America with student
loans — and, in the years after the lending boom, crushing student debt.
New details unsealed last month in the state lawsuits against Navient shed light on how Sallie Mae used private subprime loans — some of which it expected
to default at rates as high as 92 percent — as a tool to build its business relationships with colleges and universities across the country.
But those accusations have overshadowed broader claims, detailed in two state lawsuits filed by the attorneys general in Illinois and Washington,
that Sallie Mae engaged in predatory lending, extending billions of dollars in private loans to students like Ms. Hardin that never should have been made in the first place.
From 2000 to 2009, Navient’s predecessor company, Sallie Mae, from which it split off in 2014, made private, subprime
loans to borrowers it knew were likely to default, state attorneys general from Illinois and Washington said.
Those subprime loans were a bargaining chip, the government lawyers said, a tool Sallie Mae used to build relationships with schools so
that the company could make more federal loans to their students.
In recent months, the student loan giant Navient, which was spun off from Sallie Mae in 2014
and retained nearly all of the company’s loan portfolio, has come under fire for aggressive and sloppy loan collection practices, which led to a set of government lawsuits filed in January.
Students did not know about the risk, the state said in its lawsuit, but “this fact was no secret to Sallie Mae.”
Those defaults did not discourage Sallie Mae, the lawsuits show.