Navient Agrees to Cancel $1.7B in Student Loans
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- A coalition of 39 attorneys general came together to bring this case against Navient.
- The company has a long history of controversy over its handling of student loans.
- In settling the case, Navient denied any wrongdoing.
Student loan servicer Navient reached a settlement with a coalition of 39 attorneys general for a total of $1.85 billion to resolve allegations of predatory lending and unfair servicing.
The company, long the center of student debt servicing controversy, agreed to cancel $1.7 billion in private student loan debt, as well as $95 million in restitution payments for federal loan borrowers. The settlement is expected to impact about 66,000 private loan borrowers who will see their remaining debt balances erased, as well as 350,000 federal borrowers who will receive reimbursement checks.
The company did not admit to any misconduct or wrongdoing as part of the settlement. Navient's chief executive, Jack Remondi, told the Washington Post that the company decided to settle in order to end a "time-consuming, distracting, and costly process," referring to the lawsuit.
The coalition of attorneys general accused Navient of originating predatory subprime private loans to students attending for-profit schools and other institutions with low graduation rates. According to a statement from the coalition, the company is also accused of steering federal loan borrowers toward lengthy forbearances rather than toward more affordable income-driven repayment (IDR) programs.
As a result, qualified private borrowers will see the remaining balances of their private Navient loans disappear. They will receive a notice by July 2022, along with refunds of any payments made on those cancelled loans after June 30, 2021.
Additionally, federal borrowers placed in long-term forbearances are scheduled to get restitution checks of $260 each.
Navient also agreed to pay $142.5 million to the attorneys general involved in the case.
"Navient repeatedly and deliberately put profits ahead of its borrowers — it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education," Josh Shapiro, attorney general of Pennsylvania and one of the leaders of the coalition, said in a statement. "[This] settlement corrects Navient's past behavior, provides much needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure this company never preys on student loan borrowers again."
Unrelated to this case, Navient is no longer a servicer of federal student loans for the Department of Education. It recently transferred its contract to Aidvantage, a subsidiary of Maximus Federal Services. Navient will, however, continue to service federal loans owned by private lenders as well as private student loans.
The settlement included attorneys general from Arizona, Arkansas, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Washington, and Wisconsin.