Navient borrowers will receive $1.7 billion in student loan forgiveness
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A $1.85 billion settlement was reached today against student loan servicer Navient for allegations of deceptive lending practices. As a result, Navient will be required to forgive $1.7 billion in private student loan balances and distribute restitution payments to 350,000 affected federal student loan borrowers.
Here’s what Navient borrowers need to know about the lawsuit and how it could impact their student loan balance.
Navient accused of pushing borrowers into unnecessary debt
This settlement concludes several lawsuits against Navient focusing on the company’s mismanagement of loan products.
Navient allegedly pushed borrowers into expensive forbearance periods when they could have instead qualified for an income-driven repayment plan or Public Service Loan Forgiveness (PSLF). The interest that accrued during those forbearance periods was added to the original loan balance; as a result, borrowers struggled to fully pay down their principal balance and were left with never-ending interest payments.
Navient is also under fire for allegedly originating predatory subprime private student loans to students attending for-profit schools with low graduation rates as an attempt to become the school’s “preferred lender.” These predatory loans were distributed to vulnerable students even though the company knew that a large percentage likely wouldn’t be able to repay the debts.
“Navient repeatedly and deliberately put profits ahead of its borrowers,” said Pennsylvania Attorney General Josh Shapiro, who led the litigation with attorneys general from Washington, Illinois, Massachusetts and California. “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.”
Navient denies any wrongdoing, saying that the settlement will remove the added time and expense necessary to prevail in court.
Impacted borrowers to receive student loan forgiveness, settlement payments
The settlement will benefit borrowers in 38 states and Washington, D.C. It requires Navient to forgive $1.7 billion in private student loan debt — the remaining balances for nearly 66,000 borrowers – and distribute individual restitution payments of around $260 to 350,000 eligible federal loan borrowers who were placed in hardship forbearance.
Although Navient’s federally owned student loans have been transferred to Aidvantage, a servicing unit of Maximus, Navient will continue to service privately held FFELP Loans and private student loans. Moving forward, it will now be required to notify borrowers of their income-driven repayment options, including the Education Department’s temporary overhaul of Public Service Loan Forgiveness, before suggesting long-term forbearance. The settlement also requires Navient to hire and train nonincentivized specialists who will assist borrowers concerned about navigating their repayment and forgiveness eligibility.
Borrowers will be notified of eligibility by July 2022
Those receiving private loan cancellation and refunds will receive a notification from Navient concerning their balance no later than July 2022. Federal borrowers eligible for the settlement payment will receive a postcard in the mail in spring 2022 from the settlement administrator.
Private student loan borrowers impacted by the settlement do not need to take any further action at this time. Federal borrowers should update or create their Federal Student Aid account to ensure that the Education Department has the correct account information and address on file.
- Navient overview: What to know about this student loan servicer
- 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