BOSTON (AP) – Navient, a large student loan company, has settled allegations of $ 1.85 billion in misleading lending practices, officials said Thursday when they announced a settlement that would cancel student loans from tens of thousands of borrowers.
The settlement includes $ 1.7 billion in debt forgiveness and $ 95 million in repayment and involves 39 state attorneys. It resolves allegations that Navient led student borrowers to long-term indulgence instead of advising them on less expensive repayment plans, according to Pennsylvania Attorney General Josh Shapiro, who helped lead the trial and the proceedings of the settlement with the states of Washington, Illinois, Massachusetts and California.
Navient repeatedly and deliberately put profit in front of its borrowers – engaging in misleading and abusive practices, targeting students it knew would fight to pay back loans, and placing an unfair burden on people trying to improve their lives through education, “Shapiro said in a statement.
The settlement requires a court approval.
Under the settlement, Navient will cancel more than $ 1.7 billion in subprime private student loans, which were owed by over 66,000 borrowers nationwide, Shapiro said. Navient will also pay a total of $ 142.5 million, of which $ 95 million will be distributed to approximately 350,000 federal borrowers, who were placed in certain types of long-term indulgences.
Shapiro said the subprime loans were given “to borrowers they knew could not repay the money”, a situation similar to the mortgage crisis of 2008. In addition, he said, Navient “misled borrowers to surrender… and caused many to accumulate more debt and endless interest payments. “
Indulgence refers to when a lender allows a borrower to pause or reduce payments for a limited period while they rebuild their finances. However, interest on the loan continues to accrue and may ultimately result in the amount to be repaid over the term of the loan becoming higher.
Navient said it did not act illegally and it did not admit any wrongdoing in the settlement.
Navient is and has constantly been focused on helping student loan borrowers understand and choose the right payment options to suit their needs. we support, successfully back on their student loans, ”Navient’s legal director Mark Heleen said in a statement.
The settlement requires Navient to explain the benefits of income-driven repayment plans and offer to estimate income-driven repayment amounts before placing borrowers in optional repayments.
Navient will also train specialists who will advise distressed borrowers on alternative repayment options and advise public employees regarding public forgiveness of loans and related programs.
As a result of the settlement, consumers who receive termination of private loans will receive a notification from Navient together with repayment of any payments made on the canceled loans after 30 June 2021.
“Today’s settlement requires Navient to correct their mistakes … and is an important step toward resolving our broken student loan repayment system,” Massachusetts Attorney General Maura Healey said at a news conference.
The settlement also requires Navient to notify borrowers of the U.S. Department of Education’s recently announced PSLF limited exemption option, which temporarily allows millions of qualified government employees to have previously unqualified repayment periods included in loan waivers, provided they are consolidated directly. loan. Programs and submit employment certificates by October 31, 2022.