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416,000 student-loan borrowers are getting $1.8 billion in relief through a ‘landmark settlement’ with Navient

A major student-loan lender will cancel $1.7 billion in debt for 66,000 borrowers, and pay $95 million in restitution to about 350,000 more. ...
College graduation
College graduation.

  • 39 states' attorneys general reached a $1.85B settlement with Navient to resolve claims of wrongdoing.
  • They claimed the student-loan company misled borrowers and steered them into deeper debt.
  • Navient denied any wrongdoing and said its decision to settle was to avoid expenses and time in court.

Thousands of student-loan borrowers could get debt relief from one of the nation's largest student-loan companies.

On Thursday, 39 states' attorneys general announced a $1.85 billion settlement with student-loan company Navient to resolve allegations of "widespread unfair, deceptive, and abusive student loan servicing practices and abuses in originating predatory student loans," according to a press release.

Specifically, the settlement resolves claims that Navient steered student-loan borrowers into deeper debt instead of setting them on track for affordable repayment plans, along with originating "predatory" private student-loans for borrowers who attended for-profit schools regardless of their abilities to afford paying those loans back.

As part of the settlement, Navient will cancel $1.7 billion for 66,000 borrowers with private student loans, and it will distribute $95 million in restitution payments — about $260 each — to about 350,000 federal borrowers who were placed in long-term forbearances.

Massachusetts Attorney General Maura Healy told reporters eligible borrowers will not have to do anything to receive this relief — once the settlement is approved, payments will be sent in the mail later this year.

"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," Pennsylvania Attorney General Josh Shapiro said in a statement.

Navient denied any wrongdoing in a press release, saying it "expressly denies violating any law, including consumer-protection laws, or causing borrower harm. Navient also has agreed to maintain servicing 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," Navient 's Chief Legal Officer Mark Heleen said. "Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs."

Shapiro responded to Navient's statement in a press briefing, saying that "it doesn't matter what they don't admit or do admit — actions speak louder than words."

Along with student-loan relief, the settlement also requires Navient to explain to borrowers the options and benefits they have under income-driven repayment plans before placing them on forbearance, along with notifying borrowers of the Education Department's recent reforms to the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for public servants after ten years of qualifying payments.

This settlement was encouraging news to lawmakers who have held Navient in their sights for decades over treatment of borrowers. Massachusetts Sen. Elizabeth Warren wrote on Twitter that the settlement is "a major step to deliver relief for borrowers & hold Navient accountable."

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Navient was one of the three student-loan companies who announced it would be ending its federal loan-servicing contract this year, and Warren told Insider at the time the student-loan industry would be "far better off" without them. She has spent decades working to hold Navient accountable, and told its CEO Jack Remondi that he should be fired for the abuses that happened under his leadership.

Advocates welcomed the settlement news, as well.

"Borrowers may not be able to enjoy Navient CEO Jack Remondi's $8 million salary, his three homes, or his use of the company's private jet," Mike Pierce, executive director of the Student Borrower Protection Center, said in a statement. "But they can rest a little bit easier knowing that a measure of justice has been served."

Read the original article on Business Insider

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