Student loan servicer Navient will provide debt cancellation and relief to over 400,000 borrowers after years of being embroiled in lawsuits.
One of the country’s largest student loan servicing companies, Navient agreed to a $1.85 billion settlement after being sued by 39 states’ attorneys general for unfair, deceptive and predatory lending practices.
According to a Jan. 13 news release, 66,000 of those borrowers will have private student loans canceled that were taken out from 2002 to 2010 due to being victims of subprime lending by Navient. The private loans will be paid for by Navient’s investors instead of the federal government.
Nearly 350,000 federal student loan borrowers will receive $260 each in restitution, which totals $95 million.
In the lawsuits, Navient was accused of placing profits over people by engaging in several deceptive practices that buried borrowers into deeper debt.
Navient approved “predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans” and “steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans,” according to the press release.
“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,” Pennsylvania Attorney General Josh Shapiro said in a statement.
According to Shapiro, who is among the AGs who led the settlement, the settlement will prevent Navient from such behaviors in the future. “Today’s 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,” Shapiro continued.
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His words were echoed by New York Attorney General Letitia James, who told the Wall Street Journal, “For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt.”
Navient denies any wrongdoing. “The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” Navient’s chief legal officer Mark Heleen said in a statement, according to CNN.
A former unit of top student loan servicer Sallie Mae, Navient will be required to notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which allows some payments that were previously deemed as unqualifying to be counted towards student loan forgiveness.
It is important to note that federal loan borrowers who qualify for student loan relief under the settlement will be notified. The only action advised is to ensure they create or update their account at studentaid.gov and ensure it has current, accurate contact and address information.
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