Home Financial stability Navient Borrowers will receive $1.7 billion in student loan forgiveness

Navient Borrowers will receive $1.7 billion in student loan forgiveness

0



A $1.85 billion settlement was reached today against student loan manager Navient over allegations of deceptive lending practices. As a result, Navient will have to cancel $1.7 billion in private student loan balances and distribute restitution payments to 350,000 affected federal 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 ends several lawsuits against Navient centered on the company’s mismanagement of loan products.

Navient would have pushed borrowers into costly forbearance periods when they could instead have qualified for an income-driven repayment plan or a Public Service Loan Forgiveness (PSLF). Interest accrued during these forbearance periods was added to the original loan balance; as a result, borrowers struggled to repay their principal balance in full and were left with endless interest payments.

Navient is also under fire for allegedly creating risky private student loans to students attending for-profit schools with low graduation rates in an effort to become the school’s “preferred lender.” These predatory loans were distributed to vulnerable students even though the company knew that a large percentage would probably not be able to repay the debts.

“Navient has repeatedly and deliberately put profits ahead of its borrowers,” said Pennsylvania Attorney General Josh Shapiro, who led the litigation with the attorneys general of Washington, Illinois, Massachusetts and California. “He engaged in deceptive and abusive practices, targeted students he knew would struggle to repay their loans, and placed an unfair burden on people trying to improve their lives through education. “

Navient denies any wrongdoing, saying the settlement will remove the extra time and expense needed to win in court.

Affected borrowers will 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 of nearly 66,000 borrowers — and distribute individual restitution payments from ‘about $260 to 350,000 eligible federal borrowers who were placed in hardship forbearance.

Although Navient’s federally owned student loans have been transferred to Aidvantage, a service unit of Maximus, Navient will continue to service private FFELP loans and private student loans. Going forward, it will now be necessary to advise borrowers of their income-based repayment options, including the Department of Education’s temporary overhaul of civil service loan forgiveness, before suggesting a long-term withdrawal. The settlement also requires Navient to hire and train unincentivized specialists who will help anxious borrowers navigate their repayment and forgiveness eligibility.

Borrowers will be notified of their eligibility by July 2022

Those who receive a Private Loan Cancellation and Refund will receive notification from Navient regarding their balance by 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 borrowers affected by the settlement need take no further action at this time. Federal borrowers should update or create their Federal Student Aid account to ensure the Department of Education has the correct account information and address on file.

Learn more: