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Shawn Vestal: State lawsuit seeks relief for student borrowers

UPDATED: Tue., April 18, 2017

Don Adams holds his son David, 19 months, at his parents’ home in Airway Heights on Tuesday, April 18, 2017. He and his family had to resort to living with his parents due to the mountain of student debt that he is trying to deal with. (Kathy Plonka / The Spokesman-Review)
Don Adams holds his son David, 19 months, at his parents’ home in Airway Heights on Tuesday, April 18, 2017. He and his family had to resort to living with his parents due to the mountain of student debt that he is trying to deal with. (Kathy Plonka / The Spokesman-Review)

When Don Adams decided he would go to college as a way to rise above fast-food work, he started at Spokane Community College.

He paid his way with federal grants and a full-time job as a night manager at a Pizza Hut.

After struggling to keep up with that schedule, he decided he’d try the flexibility and evening classes offered at ITT Tech, a for-profit college that has since been shut down by the feds. When he enrolled, a college representative set up his “financing” for him, telling him he qualified for $45,000 for the two-year program in drafting and design.

“I thought that meant grants, with very minimal student loans,” said Adams, a 33-year-old father of two young children. “Knowing what I know now, it was the complete opposite.”

Adams received a package of 11 different loans, at interest rates ranging from 4 percent to 15 percent, that were eventually serviced by Navient Corp., the largest student-loan servicer in the country. His monthly payment, if he could afford to make it, would be more than $500. He has received repeated deferments since graduating from the program in 2012, and the interest has piled up: He now owes more than $66,000.

“We’re kind of screwed at the moment,” he said. “It’s really, really tough.”

Like millions of students around the country, Adams was caught in the unholy alliance between for-profit colleges and student lenders. ITT Tech declared bankruptcy and closed all its branches in 2016, after the federal government shut off the availability of student loans to the company. Now Navient Corp., the student-loan servicer, has been sued by Washington’s attorney general, along with Illinois and a federal consumer protection agency, alleging deceptive and unfair practices.

Navient was created in 2014 as a subsidiary of Sallie Mae, the private student loan corporation, to handle debt servicing and collection services. The lawsuit alleges Sallie Mae engaged in predatory, subprime lending in 2006-07 – aggressively making high-interest loans to people who were likely to default.

“While Sallie Mae has had the benefit of utilizing accounting practices to write off these loans as a business loss, thousands of borrowers, including borrowers in Washington, are living with and struggling to repay these debts,” the lawsuit alleges.

Additionally, Sallie Mae entered into “recourse agreements” with some for-profit schools in which the schools agreed to cover the cost of some defaults made to students under loosened credit standards. It was a deal that was good for everyone but the borrowers. Meanwhile, Sallie Mae provided “little to no help” for borrowers trapped in loans they can’t afford to repay, the suit alleges.

Navient Corp. now bears responsibility for these actions, the suit claims, because of the restructuring in 2014. The suit also alleges that Navient deceptively prevented at-risk borrowers from using some of the services intended to help them, even failing to credit borrowers for paying early or more than the minimum due. The company steered borrowers away from beneficial repayment programs based on their income, instead routing them into forbearances that were more expensive for borrowers – and more profitable for Navient.

The suit cites complaints from borrowers about the company’s aggressive collection practices, poor customer service and errors in applying payments.

Rebecca Snyder, a 31-year-old mother of two who now lives in Ritzville, said that when she could not afford to make payments on loans she took out for a medical assistant’s course through for-profit Carrington College, Navient representatives called her repeatedly, refused to work with her to find alternative ways to repay and constantly changed the terms of her agreement.

“It’s like nobody knew what the other people were saying,” said Snyder, who has now begun making the $222 monthly payments toward more than $20,000 in loans.

Snyder said she received repeated collection calls when her loan was in forbearance, and even basic elements such as payment amounts were not consistent. She was relieved to hear about the attorney general’s lawsuit.

“Every time I asked how much it was, it would be more,” she said. “I’m glad Bob Ferguson is going after them. … They’re lying to people and harassing them.”

The suit seeks relief for borrowers to be determined by the court.

Navient says the lawsuit is without merit, arguing that it has helped hundreds of thousands of borrowers rehabilitate their loans, that it follows standard industry collection practices and that the suit is based on new standards being applied retroactively to past practices.

Adams did earn an associate’s degree in drafting and design through ITT Tech, and now works in the field. He and his wife have two young children, along with medical bills they are trying to keep up with; they have moved in with his parents for the time being to help save money. He asked Navient to consolidate his loans into a more manageable single payment, and was told no.

He’s been in some form of a deferment since he earned his degree in 2012 and isn’t sure when he might be able to start making progress on the $66,000 debt.

“I don’t know if I’ll ever be able to,” he said.