Navient settles predatory student loan claims for $1.85 billion
BOSTON (AP) — Navient, a major student loan collection company, has agreed to forgive $1.7 billion in debt owed by more than 66,000 borrowers across the United States and pay more than $140 million in dollars of other penalties to address allegations of abusive lending practices.
The settlement with 39 state attorneys general was announced Thursday.
Navient “engaged in deceptive and abusive practices, targeted students it believed would struggle to repay their loans, and placed an unfair burden on people trying to improve their lives through education,” said Pennsylvania Attorney General Josh Shapiro. who helped lead the negotiations, said in a statement.
Among other things, he said, Navient tricked borrowers who were struggling to make payments into entering what are known as long-term forbearances, causing them to indebted even more.
Forbearance occurs when lenders allow borrowers to suspend or reduce payments for a limited time while they rebuild their finances. However, interest on the loan continues to accrue and may eventually result in an increase in the amount paid over the life of the loan.
Navient has denied acting unlawfully and has not admitted any wrongdoing under the settlement, which is subject to court approval.
“Navient is and has always been focused on helping student borrowers understand and select the right payment options to meet their needs,” Chief Legal Officer Mark Heleen said in a statement.
Along with canceling tens of thousands of loans, Navient will pay $142.5 million, most of which will go to about 350,000 borrowers who have been placed in long-term forbearances.
Additionally, Navient will need to do more to educate borrowers about their options and explain repayment plans.
Massachusetts Attorney General Maura Healey called the settlement “an important step toward solving our broken student loan repayment system.”
Borrowers whose loans are canceled will receive notice from Navient along with a refund of any payments made after mid-2021.
The settlement also includes Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri and Nebraska. , Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.