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Student loan servicer Navient settled a $1.85 billion lawsuit late last week, resulting in over a billion dollars in student loan forgiveness and settlement payments for qualifying borrowers. Here’s what you need to know about this week’s student loans trends and how they could impact your payments.
1 current trend within student loans for the week of Jan. 17, 2022
1. Navient settles $1.85 billion lawsuit for alleged deceptive lending practices
Last week, a settlement with student loan servicer Navient resolved several lawsuits accusing the servicer of deceptive and unfair lending practices. Attorneys general from California, Illinois, Massachusetts, Pennsylvania and Washington led the litigation last week, with 38 states and Washington, D.C., ultimately joining.
Navient allegedly pushed student loan borrowers into unnecessary, costly forbearance periods when they instead would have qualified for income-driven repayment or Public Service Loan Forgiveness (PSLF). The servicer is also accused of originating loans to students the company knew likely wouldn’t be able to repay the debts.
Navient denies the claims that it violated consumer protection laws or caused borrower harm. “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 press release.
How this affects student loans
Qualifying borrowers in 38 states and Washington, D.C., will benefit from the settlement agreement. Navient is required to forgive $1.7 billion in private student loan debt for borrowers who took out certain loans with the company and subsequently defaulted. This will primarily impact borrowers who attended for-profit schools and who took out loans between 2002 and 2010.
Navient will also distribute individual restitution payments of roughly $260 to 350,000 borrowers who were placed in hardship forbearance.
Although the servicer has transferred its federally owned student loan products to Aidvantage, a servicing unit of Maximus, it will continue to service private loans and privately owned FFELP Loans. Navient is now required to notify borrowers of all repayment options, including income-driven repayment and PSLF, before suggesting forbearance. It will also train nonincentivized specialists to assist borrowers with questions about their forgiveness or repayment eligibility.
Other than making sure their current residential address is correct, Navient borrowers don’t need to take further action. Those eligible for forgiveness will receive information from Navient concerning their balance no later than July 2022, and borrowers receiving a restitution payment can expect a postcard from the settlement administrator in spring 2022.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. During 2022, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.
- Navient borrowers will receive $1.7 billion in student loan forgiveness
- Navient is the third company to exit federal student loan servicing this year. Here’s how your student loans are affected
- Education Department overhauls Public Service Loan Forgiveness program, forgiving $1.7 billion in student loan debt