Navient will cancel the loan balances of some 66,000 student-loan borrowers to settle accusation of predatory lending.
For thousands of students it is a huge relief. Navient, (NAVI) – Get Navient Corp Report the provider of student-loan-management services, said it would cancel $1.7 billion in student loan to settle litigation filed by a number of state attorneys general, accusing the company of allegations of “widespread unfair, deceptive, and abusive student loan servicing practices and abuses in originating predatory student loans.”
Eligible private student loan borrowers should receive a notice from Navient by July 2022, along with refunds of any payments made on the canceled private loans after June 30, 2021.
The settlement, coordinated by a coalition of 39 attorneys general, resolves claims dating back to 2009 and will result in $1.7 billion in debt cancellation and $95 million in restitution.
“Navient promised to help struggling borrowers find the repayment options that worked best for them, but instead steered borrowers into situations that pushed them deeper into debt,” said Massachusetts AG Maura Healey in a press release.
End of a long legal battle
“Navient cheated students who borrowed money to pursue their dreams and allowed them to be crushed by avoidable debt, all while the U.S. Department of Education turned a blind eye,” said U.S. Senator Elizabeth Warren.
The settlement ends a years-long legal fight with states in which Navient faced two serious allegations. The company was accused of steering student borrowers into expensive forbearances instead of more flexible, income-driven repayment plans.
In settling the cases, the Wilmington, Del., company denied any wrongdoing, including violations of consumer-protection laws. And it denied causing borrowers any harm.
In a statement, the company said it has “agreed to maintain service and practices that support borrower success.”
“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,” Chief Legal Officer Mark Heleen said in the company’s statement.
The loans were originated largely from 2002 through 2010.
The loans were long overdue
Most of the debts Navient is accepting to wipe out are long overdue loans for which it was already unlikely to be repaid.
The company decided last yeaar to get out of the federal student loan business. It ended its contract with the Education Department, which allowed the company to transfer its $5.6 millioin borrower accounts to a new vendor, Maximus, which dopes business as Aidvantage.
But Navient retained a portfolio of private student loans worth billions of dollars, and it later resumed that line of business, according to The New York Times.
Navient said it would notify the borrowers and co-borrowers in question, once its agreement receives final court approval.
The loans in the agreement are private loans and are not guaranteed by the federal government, the Wall Street Journal reported.
In addition to the loan cancellations and restitution tied to the private loans, Navient will pay $95 million to about 350,000 federal loan borrowers, about $260 each.
These borrowers were placed in forbearance programs that caused them to accumulate more debt rather than in income-based repayment plans, the Journal reported.
