Settlement includes nearly $24 million in debt cancellation and over
$3.5 million in restitution
BATON ROUGE, LA – Attorney General Jeff Landry announced
today that Navient, known as one of the nation’s largest student loan
servicers, will provide monetary relief to resolve allegations of widespread
unfair and deceptive student loan servicing practices and abuses in originating
predatory student loans.
This settlement, joined by Attorney General Landry and
38 other attorneys general, resolves claims that since 2009 – despite representing
that it would help borrowers find the best repayment options for them – Navient
steered struggling student loan borrowers into costly long-term forbearances
instead of counseling them about the benefits of more affordable income-driven
repayment plans.
“Through unfair and deceptive practices, Navient drowned
many of our neighbors in debt,” said Attorney General Landry. “I am proud to
not only bring relief to Louisiana borrowers, but also establish protections to
prevent Navient from preying on students in the future.”
Attorney General Landry filed the settlement as a
proposed Consent Judgment and Complaint today in the 19th Judicial District
Court. The settlement will require court approval.
According to the attorneys general, the interest that accrued
because of Navient’s forbearance steering practices was added to the borrowers’
loan balances, pushing borrowers further in debt. Had the company instead
provided borrowers with the help it promised, income-driven repayment plans
could have potentially reduced payments to as low as $0 per month, provided
interest subsidies, and/or helped attain forgiveness of any remaining balance
after 20-25 years of qualifying payments (or 10 years for borrowers qualified
under the Public Service Loan Forgiveness Program).
Navient also allegedly originated predatory subprime
private loans to students attending for-profit schools and colleges with low
graduation rates, even though it knew that a very high percentage of such
borrowers would be unable to repay the loans. Navient allegedly made these
risky subprime loans as “an inducement to get schools to use Navient as a
preferred lender” for highly-profitable federal and “prime” private loans,
without regard for borrowers and their families, many of whom were unknowingly
ensnared in debts they could never repay.
Under the terms of the settlement, Navient will cancel
the remaining balance on nearly $1.7 billion in subprime private student loan
balances owed by nearly 66,000 borrowers nationwide. In addition, Navient will
pay $142.5 million to the attorneys general. A total of $95 million in
restitution payments of about $260 each will be distributed to approximately
350,000 federal loan borrowers who were placed in certain types of long-term
forbearances. Borrowers who will receive restitution or debt cancellation span
all generations: Navient’s harmful conduct impacted everyone from students who
enrolled in colleges and universities immediately after high school to
mid-career students who dropped out after enrolling in a for-profit school in
the early to mid-2000s.
As part of the settlement, Louisiana will receive a
total of $3,600,563 in restitution payments for more than 13,000 federal loan
borrowers. Additionally, 1,178 borrowers will receive a total of $23,736,065 in
private loan debt cancellation.
The settlement includes conduct reforms that require
Navient to explain the benefits of income-driven repayment plans and to offer
to estimate income-driven payment amounts before placing borrowers into
optional forbearances. Additionally, Navient must train specialists who will
advise distressed borrowers concerning alternative repayment options and
counsel public service workers concerning Public Service Loan Forgiveness
(PSLF) and related programs. The conduct reforms imposed by the settlement
include prohibitions on compensating customer service agents in a manner that
incentivizes them to minimize time spent counseling borrowers.
The settlement also requires Navient to notify borrowers
about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which
temporarily offers millions of qualifying public service workers the chance to
have previously nonqualifying repayment periods counted toward loan
forgiveness—provided that they consolidate into the Direct Loan Program
and file employment certifications by October 31, 2022.
As a result of today’s settlement, borrowers receiving
private loan debt cancellation will receive a notice from Navient by July 2022,
along with refunds of any payments made on the cancelled private loans after
June 30, 2021. Federal loan borrowers who are eligible for a restitution
payment of approximately $260 will receive a postcard in the mail from the
settlement administrator later this spring.
Federal loan borrowers who qualify for relief
under this settlement do not need to take any action except update or create
their studentaid.gov account to ensure that the U.S. Department of Education
has their current address. For more information, visit www.NavientAGSettlement.com.
Until recently, Navient had a contract to service
federal student loans owned by the U.S. Department of Education, including a
large portfolio of loans made under the Direct Loan Program and a smaller
portfolio of loans made under the Federal Family Education Loan (FFEL) program.
On October 20, 2021, the U.S. Department of Education announced the transfer of
this contract from Navient to Aidvantage, a division of Maximus Federal
Services, Inc. However, Navient will continue to service federal student loans
made under the FFEL Program that are owned by private lenders, as well as
non-federal private student loans.
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The coalition of 39 attorneys general were from
Pennsylvania, Washington, Illinois, Massachusetts, California, Arizona,
Arkansas, Colorado, Connecticut, the District of Columbia, Delaware, Florida,
Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,
Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New
York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee,
Vermont, Virginia, West Virginia, and Wisconsin.