BOSTON — Navient, a major student loan collection company, reached a $1.85 billion deal on Thursday with 39 states to settle claims of predatory loans, which left borrowers with huge debts they were unlikely to pay.
In the settlement, Navient will cancel $1.7 billion in delinquent private student loans for nearly 66,000 borrowers, The New York Times reported. The company will also be required to pay $95 million in restitution.
“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, the attorney general of Pennsylvania, said in a statement.
Shapiro added that Navient misled borrowers who were having trouble making payments, persuading them to enter what are called long-term forbearances -- a move that would likely incur even more debt, according to The Associated Press.
Navient will also pay $142.5 million, most of which will go to about 350,000 borrowers who were placed in long-term forbearances, the AP reported.
In a news release, Navient said the company “expressly denies violating any law.”
“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,” Mark Heleen, Navient’s chief legal officer, said in a statement. “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 said it would notify the borrowers and co-signers after the agreements receive final court approvals. Details of the deal were posted by the participating states on a new website, NavientAGsettlement.com.
“Today’s settlement is a victory for student loan borrowers in California and in our sister states who were exploited by Navient and trapped by poor servicing conduct into expensive loans that they couldn’t afford,” California Attorney General Rob Bonta said in a statement. “Navient has been one the worst actors in the student loan servicing market, and this settlement is a step toward accountability, providing direct relief for many of our most vulnerable student borrowers.”
According to Navient, borrowers in Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Minnesota, Missouri, North Carolina, Nebraska, New Jersey, New Mexico, New York, Nevada, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington and Wisconsin are potentially eligible for relief.
Most of the borrowers whose loans will be forgiven under the settlement attended for-profit schools -- like the defunct ITT Technical Institute -- that often have low graduation rates and poor job-placement records, the Times reported. Navient conceded that the private loans were a “baited hook” to reel in more federally backed loans, the newspaper reported.
The settlement agreement comes shortly before Navient leaves the federal student loan management business. The loans it is currently servicing will be transferred to Aidvantage or Maximus, according to an email sent to borrowers.
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