March 05, 2018 Articles

Student Loan Class Actions Take Aim at “a Massive Effort to Defraud Student Debtors”

Many courts are finding that student lenders have misused the U.S. Bankruptcy Code.

By Lynn E. Swanson

In 2014, Austin Smith was a law student at the University of Maine, looking for a topic to research for his law review note. He was also a regular at a local coffee shop, where another customer, a retired litigator, kept suggesting that he write about student loans in bankruptcy. It sounded boring, Mr. Smith thought. But he decided to take a look, just in case there was “something there to dig into.”

As it turned out, there was indeed something there. What Mr. Smith discovered in his law school research has become the basis for dozens of lawsuits, a new understanding of the Bankruptcy Code in courts around the country, and a nationwide class action alleging that the nation’s biggest student loan servicer, Navient, “has engaged in a massive effort to defraud student debtors and subvert the orderly working of the bankruptcy courts.”

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