By Owen Daugherty, NASFAA Staff Reporter
Navient — a private student loan company and former federally-contracted servicer for the Department of Education (ED) — reached a settlement Thursday with a group of state attorneys generals to resolve a longstanding lawsuit over allegations that the company engaged in predatory lending practices and “abusive” student loan servicing practices.
As part of the settlement, Navient will provide $1.7 billion in private student loan cancellation to more than 66,000 borrowers nationwide, in addition to $95 million in restitution payments to approximately 350,000 federal student loan borrowers.
The $1.85 billion settlement was touted by the group of state attorneys general as a win for borrowers that will put an end to “deceptive and abusive practices,” according to a statement from Pennsylvania Attorney General Josh Shapiro.
“Today’s settlement corrects Navient’s past behavior … and puts in place safeguards to ensure this company never preys on student loan borrowers again,” he added.
Navient strongly denied the charges in the lawsuit, saying its decision to settle was to avoid the additional expenses and burden it would require to win the case in court.
“Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs. In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans,” Navient’s Chief Legal Officer Mark Heleen said in a statement.
Attorneys general from 39 states and the District of Columbia representing both parties were involved in the lawsuit addressing practices surrounding loans that date back more than a decade.
The bulk of the $1.7 billion in canceled student loan debt will go toward those who took out loans to attend for-profit institutions, including ITT Technical Institute and the Art Institute.
The $95 million in restitution payments will go to approximately 350,000 borrowers with federal loans who were placed in certain types of long-term forbearances, equaling about $260 per borrower. Borrowers who are eligible to receive restitution payments as part of the settlement will receive notices in the coming months from the settlement administrator.
Borrowers with federal loans who qualify for relief under the settlement don’t need to take any action if they have a studentaid.gov account with up-to-date information, according to a site created to inform borrowers of the settlement and terms.
Additionally, Navient will be required to improve its communications with borrowers regarding student loan payment and forgiveness programs such as income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF).
Under the terms of the settlement, Navient did not admit to any misconduct or wrongdoing.
Navient has faced similar allegations in the past. The Consumer Financial Protection Bureau (CFPB), in a separate lawsuit brought against Navient in 2017, accused the student loan servicer of “systematically and illegally failing borrowers at every stage of repayment.” Navient vehemently denies any wrongdoing and has filed a motion to have the case dismissed.
Navient had managed federal student loans on behalf of ED for decades before announcing earlier this year that it would exit the space and transfer all borrowers it is responsible for to a new servicer.
Publication Date: 1/14/2022