New lawsuit against Navient calls for private student loan cancellation
A new complaint filed last week against student loan giant Navient
In the lawsuit, Jorge Villalba, a former student of the now-defunct ITT Technical Institute, argues that his private student loans used to attend the institution must be declared invalid and therefore canceled. Jorge’s mother Alicia Villalba (who co-signed the loans) is also named as the plaintiff. The lawsuit also names Sallie Mae Bank, Navient’s predecessor, as the defendant.
The lawsuit argues that Sallie Mae and Navient have taken advantage of the for-profit university system for years, granting predatory private student loans to hundreds of thousands of students like Jorge and his mother.
Jorge attended ITT Technical Institute in 2006, and the lawsuit alleges that ITT distorted his career prospects and the school’s placement rates. “ITT has attracted and maintained its student body through a network of systemic deception designed to enrich its leaders and investors by capturing the maximum amount of government student aid funded by its students’ taxpayers,” the lawsuit alleges. “Federal, state and congressional investigators have found evidence of serious and widespread abusive practices at ITT. Despite these investigations, ITT has persisted for years in trapping thousands of students seeking to improve themselves through education, leaving them with largely worthless credentials and heavy student loan debt.
The lawsuit argues that during a job interview, a company told Jorge they would not hire anyone from ITT because the students at that school were unable to meet the minimum job requirements. But by then, Jorge had already taken out nearly $ 100,000 in federal and private student loans. ITT subsequently closed under the weight of federal and state investigations into allegations of widespread fraud and predatory practices.
Jorge was able to pay off his federal student loans thanks to the borrower’s defense against repayment program. The Obama administration had previously promulgated regulations in 2016 governing this program, which was created to provide student debt relief to students who have been misled, defrauded, or otherwise harmed by predatory colleges and universities – often for-profit schools like ITT. But the program only covers federal student loans. Private student loans are not eligible or borrower defense relief, and Navient has refused to discharge Jorge’s private loans.
“Regardless of the type of loan, it was always a fraud,” Jorge Villalba said in a statement. “Everything about ITT was a lie. And these lies didn’t just affect me, they affected my whole family. Even with the cancellation of federal loans, my credit was badly affected. My mother is harassed by debt collectors who threaten to seize her salary and close her bank account. This trial is the only way for me to do anything, for my mother and hopefully for countless other people who find themselves in this horrible situation.
The lawsuit argues that Jorge is entitled to the cancellation of his private student loans under the “cardholder rule” theory. This rule requires that loans disbursed by a business entity under a lender’s or creditor’s relationship with that entity include a provision in the loan promissory note that allows a borrower to raise the same claims and defenses against the lender that it might raise against the business entity. In other words, if the borrower could present fraud allegations against ITT, the borrower should be able to assert those same fraud allegations against Navient and Sallie Mae. The lawsuit alleges there was a lender relationship with ITT where Navient or Sallie Mae provided private student loans to students to pay for tuition and other ITT fees. Essentially, the cardholder rule exists to hold the lender and the business entity equally responsible for fraudulent products or services provided by the business entity. The lawsuit alleges that Navient distorted Jorge’s right to cancel the student loan.
Relief is far from guaranteed, however, and Jorge could face an uphill battle. “Jorge’s experience underscores the never-ending battle defrauded student borrowers face to seek redress and have their legal rights recognized,” Victoria Roytenberg, senior counsel for the Predatory Student Loans Project, said in a statement. . The project represents Jorge and his mother in costume. “Until students can be freed from all debts created by predatory schools – whether federal or private – we will continue to fight to ensure that borrowers like Jorge and Alicia receive justice. “
The trial, Villalba vs. Navient, was filed in California Superior Court in Los Angeles by Project on Predatory Student Lending and Golden and Cardona-Loya LLP.